Policy brief: reforms for inclusive growth and democratic renewal

Summary

Since 2014 GDP has grown alongside rising inequality, fiscal centralisation and democratic erosion. Employment has grown, and the PLFS worker-population ratio for all ages rose from 34.7% in 2017-18 to 43.7% in 2023-24. The share of workers in regular jobs with social security fell over the same years, from 11.5% to 10.1%. In the author's judgement these trends become harder to reverse the longer they run.

The brief has not modelled the effects of the package, and it sets no deadline.

Priority reform package in five pillars

The five pillars below are proposals. The budgets and targets attached to them are what the brief proposes. They are not forecasts, because the brief has not modelled how many jobs, how much revenue or how much change in inequality the package would produce.

Pillar 1: Employment emergency response

Immediate actions (0-6 months)

National Employment Guarantee Act: Extend MGNREGA to urban areas with 150-day guarantee
MSME Revival Package: ₹5 lakh crore credit guarantee scheme at 4% interest
Apprenticeship Mission: Target 10 million youth in 12 months

Policy	Timeline	Budget	Target
Urban Employment Guarantee	6 months	₹75,000 cr/year	15M jobs
MSME Credit Scheme	3 months	₹50,000 cr provision	20M jobs protected
Skills & Apprenticeship	Immediate	₹25,000 cr	10M trained

Pillar 2: Restoring fiscal federalism

Constitutional reforms required

Abolish Cess/Surcharge Loophole: Constitutional amendment to include all taxes in divisible pool
Widen the shared pool: The 16th Finance Commission sets the states' share of the divisible pool at 41%, but because cesses and surcharges sit outside it, devolution is 34.7% of gross tax revenue in 2026-27 (budget estimate)
GST Council Reform: Voting rights proportional to state GDP contribution
Borrowing Autonomy: No reform conditions on state borrowing of the kind attached to the extra borrowing allowed in 2020-21

Cesses and surcharges were 24.4% of the Union's gross tax revenue at their peak in 2020-21, 18.0% in 2024-25 and 14.3% in the 2026-27 budget estimate (15th Finance Commission; Union Receipt Budgets). None of that revenue is shared with the states.

Pillar 3: Reducing inequality

Progressive taxation reforms

Measure	Current	Proposed
Wealth Tax (>₹10 Cr)	0% (wealth tax abolished from 2015-16)	2%
Inheritance Tax (>₹5 Cr)	0% (estate duty abolished in 1985)	25%
Capital Gains Tax	12.5% long-term and 20% short-term on listed equity (since July 2024)	30%
Corporate Tax (>₹100 Cr profit)	22% base, 25.17% with surcharge and cess (section 115BAA)	35%

Universal basic services

Healthcare: Increase government health spending (Centre and states) to 3% of GDP, from 1.9% in 2023-24 (Economic Survey 2023-24)
Education: Implement Right to Education up to Class XII
Nutrition: Universal PDS for bottom 75% population
Housing: 50 million affordable homes by 2030

Pillar 4: Independence of the statistical system

Institutional reforms

Statistical Commission Act: Grant constitutional status like Election Commission
Census 2027: Hold population enumeration on the notified February 2027 schedule, including caste enumeration, and publish results on a fixed timetable
Data Transparency Law: Mandatory release of all surveys within 3 months
GDP Methodology Audit: Independent international review of 2015 changes
Household Production Satellite Account: Publish one, using the Time Use Survey hours already collected

Count the unpaid work

National accounts put a price on the rent of an owner-occupied home and no price on the care given inside it. India runs a Time Use Survey, so the hours are already collected. Women aged 6 and above who do unpaid domestic work spent 289 minutes a day on it in 2024, men 88 (Time Use Survey 2024). Published valuations of that work span 7.5% to 36% of GDP, and the range is that wide because no agency has been asked to narrow it.

The ask: a household production satellite account, kept alongside the core accounts, which would remain unchanged. Several statistical systems maintain one.
Why it is cheap: the expensive part, the survey, already exists and has run twice.
What it would settle: whether the 60% of Indian women outside the counted labour force (PLFS, 2025) are not working, or work that the accounts decline to recognise. 81.5% of women aged 6 and above did unpaid domestic work on the survey reference day (Time Use Survey 2024).
Sequencing: a satellite account is a measurement reform and commits no spending. It can precede any decision about what to do with the finding.

Data first: Without reliable data, policy cannot be based on evidence. The suppression of the 2017-18 consumption survey and the delay to the census have left India without basic data, and that must end immediately.

Pillar 5: Strengthening democratic institutions

Immediate measures

Electoral Finance Reform: Require parties to disclose the source of every donation. Anonymous cash donations have been capped at ₹2,000 since the Finance Act 2017, and the cap does not reach donations made by other means.
Media Independence: Anti-monopoly law limiting ownership to 2 outlets
Judicial Autonomy: Collegium appointments within 30 days
RTI Strengthening: Reverse 2019 amendments, add penalty clauses
Federal Institutions: Restore Planning Commission with state representation

Implementation roadmap

Phase	Timeline	Key Actions	Success Metrics
Emergency	0-6 months	Employment guarantee, MSME support, data release	Jobs under the guarantee reported each quarter, all withheld surveys published
Stabilization	6-12 months	Tax reforms, fiscal devolution, institutional independence	Cess share falling, new tax revenue reported in the Budget
Structural	12-24 months	Constitutional amendments, universal services, census	Cesses inside the divisible pool, Census conducted
Consolidation	24-36 months	Full implementation, monitoring, adjustment	Share of workers in regular jobs with social security above its 2023-24 level of 10.1% (PLFS), top 1% income share falling

Political economy considerations

Building a reform coalition

States: unite on fiscal federalism, which affects every party
Business: MSME associations as advocates of reform
Civil society: a focus on transparency and employment
International: climate finance tied to inclusive growth
Youth: the employment guarantee as a cause to organise around

Overcoming resistance

Challenge: vested interests benefit from the status quo.

Strategy: build a countervailing coalition through

State government unity across party lines
Business case for inclusive growth
International pressure on democratic norms
Youth mobilization on employment

Costs

The package has not been costed as a whole. The budgets in Pillar 1 are proposals, and the brief makes no estimate of the revenue the tax measures would raise or of their effect on growth. Any such estimate would need a published model behind it.

Risks the author sees in inaction

These are the author's judgements of risk. They are not forecasts.

Economic: Lost decade of growth, permanent inequality
Social: Youth unrest, regional tensions, caste conflicts
Political: Democratic breakdown, authoritarian consolidation
International: Isolation, lost leadership opportunity

Who should act, and how

Central government: convene an all-party meeting on the economic emergency within 30 days.

State governments: unite on fiscal federalism regardless of party affiliation.

Opposition: make employment and federalism core electoral issues.

Civil society: press for data transparency and democratic accountability.

International partners: link assistance to measures of inclusive growth.

Policy brief for reform