Cautious optimism

The >Economic Survey presented in Parliament by Finance Minister Arun Jaitley reaffirms the positive growth numbers that have been projected by many global agencies, including the International Monetary Fund. Coming just a couple of days ahead of the >Union Budget , the larger picture detailed by the Economic Survey should provide Mr. Jaitley a measure of confidence to show the business-friendly side of the BJP-led NDA government with a reform-oriented road map. The Survey indicates the possibility of India posting 7-plus per cent GDP (gross domestic product) growth for the third year in a row. A 7.2 per cent growth rate in 2014-15 and a possible 7.6 per cent expansion in 2015-16 must be read favourably in the context of the global slowdown and domestic concerns about the farm sector after insufficient monsoon rains followed by a warm winter. The Survey is quite optimistic about 7 to 7.75 per cent growth in the coming fiscal year — in fact, the claim is made that “conditions do exist for raising the economy’s growth momentum to 8 per cent or more in the next couple of years’’. Liberally lauding the government for its initiatives on the fiscal front, the Survey indicates that the Centre should be in a position to adhere to its fiscal deficit target of 3.9 per cent of GDP. A robust expansion in the service sector, accelerated growth in industry and a pick-up in IIP (Index of Industrial Production) have all, according to the Survey, created a climate of optimism. Still, given the extremely uncertain external environment, the Survey warns that “India’s growth will face considerable headwinds”.

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It is in offering a prescription to deal with this malady of becalmed global demand that the Survey makes bold. It makes a strong and valid case for giving a big push to agriculture, health and education. It repeats the widely articulated industry demand for addressing the “exit problem” that is hurting the economy. Calling it a “Chakravyuha challenge’’, the Survey lists the enormous fiscal, economic and political costs involved in sustaining incapacitated ventures. Another meaningful suggestion is that India move from a pro-industry approach to one that is “genuinely pro-competition”. The growth momentum, it is felt, could well be sustained by “activating domestic sources of demand’’. Interestingly, the Survey sees in the implementation of the Seventh Pay Commission recommendations a demand-booster. The Reserve Bank of India, however, has chosen to view the pay panel-induced payout from the prism of inflation. The Survey has rightly called for a quick resolution to the twin balance sheet challenges — the impaired finances of public sector banks and corporate houses. Indeed, this requires a holistic and fair solution. Suggestions such as plugging leakages in subsidy payouts, bringing more income-earners into the tax net, phasing out tax exemptions, not raising exemption threshold limits, introducing differential power tariff and imposing higher property taxes are all resource-raising options listed to deal with the resource crunch. How much of this purposefulness will in fact inform the new Budget will be ascertained on Monday.

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Published - February 27, 2016 03:56 am IST