In order to sustain growth at 7-8 per cent levels, the government will need to focus on issues related to land, labour, tax and overall ease of doing business, says a Morgan Stanley report.

According to the global financial services major, the root cause of the challenging macro environment in India over the past few years has been the sharp deterioration in the productivity dynamics.

“We believe that the government’s policy action has helped to complete the macro adjustment cycle and reverse the productivity-weakening policies,” Morgan Stanley said in a research note adding “the economy is on track to transition to higher growth and lower inflation”.

It further noted “in order to sustain growth at 7-8 per cent levels, in the medium term the government will need to focus on addressing issues related to land, labour tax, the policy regime related to infrastructure, and overall ease of doing business.”

There is very low chance of the new bill being approved in the upper house as amid continued resistance from the opposition parties; moreover, the ruling coalition lacks a majority in the upper house, the report said.
Meanwhile, the government recently decided not to re-promulgate the ordinance to amend Land Acquisition Act, 2013. The joint committee of parliament which is examining the bill has been granted sixth extension of its term of four months.

Regarding tax reforms, the report said the Goods & Service tax (GST) constitutional amendment bill has been passed in the Lower House of Parliament. However, in the Upper House it has been referred to the select committee.

On ease of doing business, the report said a number of small but important steps have been taken, particularly those related to investment approval process and we expect increased visible signs of state-level competition for attracting new investments, particularly in manufacturing.