Policy certainty is critical to attracting investments from both domestic and foreign investors.
The Economic Survey has called for predictable policy actions, consistency in policy, and a period for which the policy should not be changed.
Policy certainty is critical to attracting investments from both domestic and foreign investors.
"To ensure predictability, the horizon over which policies will not be changed must be mandatorily specified so that investor can be provided the assurance about future policy certainty," the Survey said.
The Survey agreed that though specifying a period for policy continuity could create some constraints for policy makers, it would go a long way in ensuring policy certainty.
It pointed out that such horizons were already applicable for policies like the Fiscal Responsibility and Budget Management Act, and the Monetary Policy Framework of the RBI.
The Survey recommended that the government could also use labels such as "Standstill" versus "Ratchet up" to categorise various categories of policies according to the level of commitment about future certainty that it can provide.
Quoting the adage that "what gets measured gets acted upon", the Survey recommended that economic policy uncertainty (EPU) index must become an important index that policymakers at the highest level monitor on a quarterly basis.
It also called upon the government to encourage construction of economic policy uncertainty sub-indices to capture economic policy uncertainty stemming from fiscal policy, tax policy, monetary policy, trade policy, and banking policy.
"Tracking these sub-indices would enable monitoring and control over economic policy uncertainty," the Survey said.India Union Budget 2019: What does Finance Minister Nirmala Sitharaman have up her sleeve? Click here for top and latest Budget news, views and analyses.
