Union Finance Minister Arun Jaitley tabled the Economic Survey 2013-14 in Parliament on Wednesday, which opens with a reassurance that in 2014-15, the economy is poised to overcome the sub-5 per cent growth witnessed over the last two years.
It projects that the gross domestic product (GDP) growth this fiscal year will be in the range of 5.4 to 5.9 per cent and cautions that the recovery can only be gradual.
Under “Issues and Priorities,” the Economic Survey sets out the Modi government’s reforms agenda. Legislative, administrative and regulatory changes for transitioning to a pure market economy are on the cards. The state’s role in such an economy is indicated to be restricted to “interfering only when there is market failure … As a consequence, laws permit all activities unless the state specifically restricts them in the context of market failure.” Market failures are described as monopoly power, asymmetric information or externalities.
Commenting on the ideological shift signalled in the Survey, the UPA’s Rural Development Minister, Jairam Ramesh, told The Hindu , “The big gap in the Survey is the absence of meaningful discussion on social justice and equity issues.”
The drastic reforms indicated in the Survey include new regimes for taxation, subsidies, financial consolidation, government expenditure, food markets and even the Budget process itself.
The complete re-orientation will be undertaken through “short-term stroke-of-the-pen reforms, medium-term reforms that can be undertaken through executive decisions or the Finance Bill and long-term reforms for institutional change.”
In all his statements so far, the Finance Minister had suggested that the UPA government left behind a weak macro economy, especially on the fiscal side. The Survey, however, says the macro economy has stabilised; there’s a dramatic improvement in the external situation and that the fiscal deficit declined for the second year in a row. The surging financial markets are reflecting this, besides the expectations of a change for the better, the Survey says.
Chidambaram lauds ‘restrained language’ in Survey
Appreciating the restrained language, UPA’s Finance Minister P. Chidambaram said, “The Survey resisted the temptation [as the UPA resisted in 2004] to point an accusatory finger at the outgoing government. I am glad that the Survey has acknowledged the UPA government’s measures on the macro stabilisation front and the successes achieved in containing the current account deficit and reducing the fiscal deficit.”
Mr. Ramesh added, “In politics, where you sit [in government or Opposition] determines where you stand. The BJP was playing politics but the Survey is a vindication of what we have been saying on the poverty and employment data and an indication of things to come.”
The Survey is aligned with the UPA government’s position on the reduction in the absolute number of poor from 407.1 million in 2004-05 to 269.3 million in 2011-12. The BJP has contested that the UPA government’s rule coincided with such poverty reduction. On the interpretation of the official employment data, the Survey says that the decline in the labour force is in some part due to “rapid increase in female participation in education.”
The UPA has the same position on the issue which the BJP has questioned.
The Survey’s analysis of the demand side pressures that are fuelling food inflation underscores the fact that the share of consumption of protein-based items such as fruits, vegetables, fish, egg and meat is rising which, it adds, is arising from growing incomes.
The Narendra Modi government’s intention to address structural issues afflicting the farm economy are in focus in the Survey but it also says that “substantial strides in agricultural production have been made in the last few years.” It attributes this “robustness” to steady improvements in investments, support prices to farmers and the area under cultivation.
It also notes that total foreign direct investment inflows into major infrastructure sectors registered a growth of 23 per cent in 2013-14 against the contraction of 61 per cent in the previous year.
