RCEP is a large trading bloc, India should not stay out of it, says Arvind Panagariya

According to Panagariya, the decline in India's growth rate can be attributed to two major factors.

"One is the non-performing assets of banks and the clean-up process that is going on has thrown off the financial markets. The credit is not expanding as it should have been. This has been because the corporates themselves have their balance sheet a bit in disarray and the banks are now scrutinising their loans a lot better, they know that they cannot do business the way they used to do in the past. They have to be responsible for whatever they lend. The other is the anti-corruption drive by the prime minister which is changing the way business is done in India. That is something that people don’t recognise but the fact is that a lot of the things that you were able to do in the past in terms of free-wheeling and dealing, you cannot do that anymore. So there is another major change in the way we do business to which the corporates have to adjust,” he observed.

“Personally, I remain optimistic. It might take six months to a year, but after a year, if you are looking at the year 2020-2021, I would expect the India growth story to return to 7.5 percent which is what we have experienced during the first five years of Prime Minister Narendra Modi’s administration,” said Panagariya.

In terms of slow growth due to global backdrop, he said the country has to turn to bold reforms. "The government has done, people don’t give government enough credit, things like insolvency and bankruptcy code (IBC), goods and services tax (GST) and the

knock-off on the corporate profit tax rate are all major reforms. Reforms have been done but I think we are in the second term of PM where also a couple of good major things have been done. However, we need to do the labour law reforms. We need to return to liberalising trade and we will also tackle the issue of land acquisition act," he said.

The economist pointed out that while the PM tried to do it in his first term early on, the opposition parties simply won’t play on that. "But now the government does have the votes and it may be able to carry the reform on land acquisition. So we need to do that. We also need to think very hard in terms of coastal employment zones," he added.