Declining Investment Rate and Union Budget

Evidence from literature and data on inter-state differences show that FDI inflows and investment by domestic firms depend on a common set of variables. To drastically increase the investment rates, the government should increase the spending on infrastructure - both physical and social, introduce major administrative reforms to improve efficiency and reduce delays and bottlenecks. These are not possible unless the size of the government is reduced and transparency and accountability in decision-making and administration introduced. Hard and harsh decisions should start with the ruling class, namely, reducing the pecuniary benefits to the parliamentarians, introducing a ceiling on the size of union and state cabinets, and closing down of several government departments that have no role to play in the new economic regime.