OECD “Better Policies”  Series




OECD has issued a report outlining areas that are critical to India’s long-term economic performance and social development: financial sector, competition, regulation, innovation, infrastructure, energy efficiency, green growth, poverty reduction, employment, education and health.

Key OECD Recommendations

•     Strengthen fiscal frameworks through legislative and institutional reforms.

•     Improve spending efficiency, especially on subsidies, by improving targeting and delivery mechanisms.

•     Proceed with the implementation of the GST, minimising exemptions to keep the base as broad as possible while also aiming for a single rate within each state.

•     Implement a revised Direct Tax Code which streamlines collection and reduces the overall burden of direct taxes.
•     Push reforms in the area of international taxation in order to boost investor sentiment and provide a stable and certain tax environment for businesses.

•       Adopt the National Competition Policy, and include an institutional framework that involves the Competition Commission of India in conducting the reviews.

•     Introduce a cross-government training programme on implementing competition assessment.

•     Adopt the revised Company Bill.

•     Implement and enforce the foreign bribery law and continue engagement with the Indian private sector in raising awareness about foreign bribery.

•     Conduct an administrative simplification programme to reduce the burdens and costs on businesses.

•     Create the necessary policies, institutions, and processes to implement a transparent, evidence based regulation-making system using regulator best practice tools.

•      Mitigate risks of waste and corruption in the whole procurement cycle (from project design through the tendering process and to the contract management).

•     Focus efforts to increase public transparency and reinforce public trust.

•     Strengthen the independence of the Lokpal/Ombudsman mechanism.

•    Continue to reduce trade and FDI barriers, especially in goods and services sectors with strong links to the manufacturing sector.

•    Further simplify and improve the transparency of the trade and investment regimes, as well as rationalise the export regime, including export restrictions.

•    Improve conditions and incentives for business R&D and innovation, and move towards a business centred innovation system ;

•    Reform the public R&D system by introducing competitive funding mechanisms, efficiency and relevance-enhancing measures as well as incentives for science-industry cooperation ;

•    Improve framework conditions for innovation, including essentially the provision of highly skilled labour force and the public support for entrepreneurship ;

•    Enhance international openness.

•    Ensure steady increase in investments in R&D and innovation as a share of GDP.

•    Monitor highway PPP contracts in relation to demand risk as economic conditions weaken.

•    Include road safety indicators in developing indicators of welfare to complement GDP.

•    Issue guidelines to ensure safe and adequate space and protected infrastructure for pedestrians, cyclists and public transport.

•    Streamline land titling and improve land record management.

•    Initiate reform of railway accounting and finance to address cross-subsidies.

•    Liberalise the allocation of bank credit.

•    Further open the capital of public-sector banks while allowing new private banks, including foreign ones.

•    Transform rural banks and cooperatives into smaller privately-owned banks free of governmental shareholding and concurrently modernise their regulation.

•    Streamline regulatory arrangements so as to reduce overlaps and compliance costs.

•    Further modernise the financial sector’s legal infrastructure.

•    Improve databases on household creditworthiness.

•    Continue efforts to reduce fossil fuel subsidies to free-up scarce public resources while reducing the incentives for environmentally harmful activities.

•    Evaluate the use of environmentally related taxes and consider carefully whether the tax rates applied reflect environmental damage caused by consumption and production.

•     Continue promoting a balanced expansion of the renewable energy sector.

•    Adopt a comprehensive reform approach to further lower the incidence of poverty and reverse the pattern of growing inequality. This multi-dimensional approach must include education, health care and labour market reforms.

•    Enhance the cost effectiveness properties of the NREGS, by ensuring that the wage is set at a level around the minimum wage.

•    Re-target environmentally-harmful subsidies, to more directly support poor households and increase equity.

•    Tackle regulatory and infrastructure barriers still preventing small towns from realising their potential.

•  Tightly define the benefit package on the grounds of cost-effectiveness.

•  Link additional funding to States to expanding coverage of health care to the poor

•  Contract with the private sector where they can usefully deliver services to those in need

•  Further regulate pharmaceuticals, particularly the supply chain for key drugs and encourage better prescribing behavior

•  Better regulate private health insurance in India’s overall architecture, to make it a better financing option for those with the capacity to pay

•  Continue with current programmes, such as RMSA, that seek to raise participation in secondary education while also improving learning outcomes.

•  Develop a system of assessment to better identify reform priorities and track implementation and progress.

•  Encourage job creation in the formal sector by reducing the administrative burden for dismissal faced by large firms.

•  Couple greater scope for firms to adjust employment levels with greater severance entitlements for dismissed workers and greater provision of reemployment support for dismissed workers.

•  Co-ordinate labour market reforms with measures to strengthen and better target social protection systems, to boost more inclusive growth.

•  Begin to shift public expenditures away from price support and input subsidies towards productivity-enhancing investments that support the long-term competitiveness of the agriculture sector.

•  Improve agriculture innovation systems, including research and development, technology adoption and transfer, education, and farm training and extension services.

•  Develop water resources and irrigation management institutions to improve the sustainable use of water.

•  Improve rural finance by enhancing regulatory oversight, creating an enabling environment for the development of micro finance institutions in rural areas, and strengthening the legal framework for loan recovery.

Download Full OECD Report

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September 2021