The two principal themes of the Economic Survey, maintaining the new growth momentum and containing inflation, have dominated all recent discourses on the macroeconomy. But while the RBI in its latest review of monetary policy has opted for price stability, the Survey suggests that maintaining the high level of economic growth would be the priority area. The biggest challenges extending to the medium term are to sustain rates of 9 per cent and more while moderating inflation and simultaneously to make growth more inclusive. The surge in inflation at this juncture is, no doubt, a matter of serious concern. Acknowledging that there are no quick-fix solutions to the problem of rising prices, the Survey says the fight against inflation has to be calibrated without impeding growth. Supply side shortages of goods of mass consumption, such as wheat and pulses, compounded by the poor agricultural performance account for much of the inflationary pressures. The government has in the recent past cut import duties on several items and banned the export of a few others, including sugar and milk powder. While some more initiatives, especially by way of customs duty reductions, are very likely in the budget, it is conceded that stimulating supplies of essential commodities in the domestic market to arrest prices takes time. Combating inflation calls for a multi-pronged strategy, with the RBI working in tandem with the government.

While industry and services have underpinned the growth momentum, agriculture continues to be a laggard. Although the share of agriculture in the GDP has been coming down, its underperformance is a matter of serious concern, especially because around 50 per cent of the population is dependent on it. Infrastructure constraints are a source of perennial worry. Within the social sector, education, health and poverty alleviation are thrust areas, necessary for inclusive growth. Despite the economy expanding rapidly, the problem of high unemployment continues. Overall, the Survey is upbeat on the recent economic performance. There has been unprecedented tax buoyancy, with tax collections under all heads except excise showing robust growth. The external sector continues to be in good health with reserves adding up to nearly $185 billion. Domestic savings and investment rates have been climbing impressively over the past five years. The government is on course to meet the fiscal deficit target of 3.8 per cent though there is considerable scope for tightening revenue expenditure. The Survey is an impressive document but it remains to be seen how much of its hard-headed analysis is reflected in the political economy of budget-making.