Truth that Matters. Stories that Impact

Truth that Matters. Stories that Impact

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Land and Investment Reforms Crucial for India’s Growth Goals, Say Economists

Addressing domestic policy bottlenecks, modernizing land administration, and establishing a predictable investment framework are critical elements needed to power India’s next wave of economic expansion, according to leading economists.

What Happened

In his Independence Day address, Prime Minister Narendra Modi outlined ‘Sapta Dhara’, or seven streams of national strength spanning sectors such as manufacturing, agriculture, infrastructure, soft power, and global influence, aimed at driving long-term economic transformation. Modi indicated that the country intends to advance aggressively toward next-generation reforms in the near future.

Economists analyzing the reform roadmap note that the path toward the ‘Viksit Bharat 2047’ vision relies heavily on targeted micro-level reforms rather than sweeping macro adjustments. Crucial priorities include easing land acquisition processes, enhancing domestic business predictability, and stabilizing foreign direct investment (FDI) inflows.

Key Highlights

  • Growth Target: Crisil Chief Economist DK Joshi highlighted that overcoming structural bottlenecks will help India sustain an annual GDP growth rate of 8 per cent, which is required to attain developed-economy status by 2047.
  • Manufacturing Push: Land reform is central to the national objective of expanding manufacturing’s share of gross domestic product from the current 16 to 17 per cent to 25 per cent by 2035.
  • Land Records and State Disparities: Madras School of Economics Director N R Bhanumurthy pointed out that resolving land record discrepancies is essential, observing that southern and western states have outperformed northern and eastern regions in manufacturing due to better land management.
  • Fiscal Incentives for States: Because land is a state subject, Finance Minister Nirmala Sitharaman allocated three-year fiscal support to state governments in the Union Budget for FY25 to overhaul land administration, urban planning, usage rules, and building bylaws.
  • FDI Downturn and Treaty Revisions: Net FDI inflows fell to $7.65 billion in FY26 compared to an annual average of approximately $40 billion between FY20 and FY22, following the 2016 termination of roughly 60 bilateral investment treaties (BITs). The government is currently preparing an updated model BIT.
  • Labour and Indirect Taxes: Following the consolidation of 29 central labour statutes into four distinct codes, economists suggest evaluating their impact before initiating new labour revisions. Meanwhile, further streamlining of the Goods and Services Tax (GST) is recommended, including bringing petroleum products under its purview.

Why This Matters

Achieving a developed economy status by 2047 demands sustained high growth and a substantial scale-up in industrial capacity. However, manufacturing expansion remains constrained by land acquisition friction and regulatory compliance burdens. Furthermore, a steep drop in net foreign direct investment underscores the need for regulatory certainty and refreshed bilateral treaties to attract the capital required to fund India’s long-term industrial ambitions.

What to Watch Next

Key developments to monitor include the central government’s rollout of an updated model bilateral investment treaty, following the review announced in the FY26 Budget. Observers will also track the adoption rate among state governments utilizing central fiscal assistance for land registry and urban planning reforms, as well as ongoing discussions regarding the inclusion of petroleum products under the GST regime.

Frequently Asked Questions

What is the Sapta Dhara framework?

Sapta Dhara refers to seven streams of national strength identified by Prime Minister Narendra Modi—encompassing manufacturing, agriculture, infrastructure, soft power, and international influence—intended to guide India’s economic transition toward 2047.

Why are land reforms primarily dependent on state governments?

Under the Indian Constitution, land is classified as a state subject. Although the central government provides fiscal support and guidelines, individual state administrations are responsible for implementing land records digitization, zoning rules, and acquisition policies.

What is the status of India’s Bilateral Investment Treaties?

India ended around 60 bilateral investment treaties in 2016. A review of the model BIT was announced in the FY26 Budget, with an updated framework expected to help foster a more predictable environment for foreign capital inflows.

Source: Business Standard report on economic reforms and industry growth.