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.

Infrastructure too is an an area of concern, where the report suggests a greater role for the private sector, drawing inspiration from the telecom sector where private players have enhanced competition and accessibility. “Private investment has increased from 15 per cent in 1996-97 to 26 per cent whereas public investment has remained at 7.5 per cent”, confirmed ICRIER chairperson Isher J Ahluwalia. In terms of improving the business environment, the report suggests the setting up of a new bankruptcy law that will simplify the restructuring of insolvent firms. It also calls for the removal of the ban on foreign direct investment (FDI) in retail shops.

Revenue deficit to be removed by 2008-09

New Delhi: Prompted by high economic growth, the Government is proposing to wipe out the revenue deficit and reduce fiscal deficit to 3 per cent of GDP in 2008-09. “We are on track to bring down the fiscal deficit to 3.3 per cent this year and to 3 per cent the next year and hopefully remove the revenue deficit in 2008-09”, finance secretary D Subbaro said while speaking at the launch of the OECD economic survey of the Indian economy here on Tuesday.