According to the economic survey of India 2007 conducted by the Organisation for Economic Co-operation and Development (OECD), India’s annual economic growth may reach a sustainable 10 per cent if four key reforms are made in the system. “Four major reforms, namely improving the business environment, infrastructure, public finance and labour market, are required for India to achieve 10 per cent growth”, said OECD secretary-general Angel Gurria. According to the report, the reforms in the last two decades, leading to a greater role of the private sector in the domestic market, reduction of entry barriers, income tax rates and intervention in most forms of foreign trade, has led to the growth of 9 per cent that is witnessed today, which makes it plausible for real incomes to rise by 7 per cent annually, doubling real income in a decade. This is the first survey done on India by OECD.

According to Gurria, labour reforms are the most important step to attain self sustaining growth. Only 15 per cent of the Indian labour market has regular employment contracts and of those, only about one-fourth are in the organised sector. Even as the productivity of the formal sector is 13 times than of informal sector, bound by rigid labour laws, firms have been hiring staff on temporary contracts. “Barriers to employment in the organised sector need to be lowered. This can be achieved by giving the State more jurisdiction in this area”, says the report. “We have found that states that have gone for labour reforms have larger labour mobility and more productivity”, said Gurria.

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