Chief Economic Advisor Raghuram G. Rajan’s prescription in the Economic Survey 2012-13 appears to be just what the doctor ordered. For the first time in recent years, the Survey tabled in Parliament by Finance Minister P. Chidambaram comes out as an economic document, which is consistent with the government’s line of thinking.
Of course, Mr. Chidambaram has been at it for a long time, ever since he took over the reins of North Block. His mission — to get the economy back on track and for which the ‘dream Budget’ Minister has been working on with surgical precision. First, he set to work at least two committees to chart out a correction programme, followed it up with a statement on what he intended to do on the fiscal front and ensured that diesel prices were virtually deregulated.
Thereafter, he went on to assure foreign investors of stability in the tax regime and effectively buried the ‘ghost of GAAR’ to convince investors that India still remains a safe destination.
The Survey in this respect is a carry forward of the same line of thinking, unlike earlier years when the recipe contained in the economic document was at variance with what is politically doable.
The Survey tilt almost makes it clear that tax rates will not be tinkered with impose a higher levy on the super rich as it leads to greater evasion. The primary objective of the Budget would be to widen the tax net further and ensure greater compliance. Neither is estate duty or inheritance tax likely.
However, some of the painful decisions that may be expected is some tinkering in the pricing mechanism of oil, as far as the oil marketing companies (OMCs) are concerned, so as to bring down the subsidy bill and putting in place a permanent system to gradually bring oil product prices to market-determined rates. Another proposal, though not painful for the public as they would be covered by the PDS, is decontrol of sugar.
Major policy shift
Yet another major policy shift would be to move towards investment-driven proposals, instead of consumption-driven moves, which would call for a number of market-oriented incentives and sops for attracting savings towards productive assets such as infrastructure and equity markets instead of the current craze for gold.
This is clear from what Dr. Rajan said at his press briefing during the day. “What we need to do is turn around investments, turn around governments' saving and increase household savings,” he said while stressing that the Indian economy is at the turning point. India, he said, is passing through a difficult phase but a turnaround is round the corner with over six per cent growth likely next fiscal on the back of initiatives taken by the government to improve investor sentiments.