The Economic Survey has been presented this year in two parts. The self-contained first part looks at the future and signals desirable policy directions. The second part is the more exhaustive survey of the economy, prepared by the other professional economists in the ministry.
The dominant theme of the Survey's assessment of economic prospects is achche din aa rahe hai (good times are imminent). High growth, low inflation, a falling current account deficit and growing international interest in investing in India is what it sees in the year ahead. How plausible is this optimistic message?
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A part of this optimism, the projection of a 2015-16 growth rate of 8.1-8.5 per cent, is at least partly a consequence of the recent revision in the GDP numbers, whose basis the Survey itself gently questions. The fall in the investment rate is very real, the prospects for a revival of investment by the over-leveraged private sector are quite dim, banks are struggling with rising non-performing assets and public investment by the Centre will be constrained by the large increase in revenue transfers to the states. The Survey recognises this but seems to count on foreign inflows and makes much of the improvement in India's standing in what it calls the Rational Investor's Ratings Index. But what if interest rates rise in the US, the euro zone and Japan fail to resolve their nations' difficulties and the money bags of the oil-rich are emptied by low oil prices?
For many investors, the key to a growth revival lies in a clear commitment to policy reforms that are corporate friendly. Here, the Survey rules out the possibility of big-bang reforms à la 1991 and speaks of "a persistent, encompassing and creative incrementalism" in the reform process. It also signals that reforms do not mean any dilution in the commitment to use public policy for social purposes like poverty alleviation or health and education for all. It adds to the new crop of acronyms by counting on JAM - Jan Dhan Yojana, Aadhaar and mobile phones - to reduce leakages in the delivery of benefits.
The first part of the Survey clearly bears the imprint of the new Chief Economic Advisor, Arvind Subramanian. For instance, in the suggestion that India could build up its reserves to $750-1,000 billion and use it to exercise economic and political power globally, as China is doing now with its huge reserves. His imprint can also be seen in the way in which data has been mobilised to substantiate every assessment and international comparison.
The tone and tenor of the Survey has ramped up expectations of an investor and investment-friendly Budget. Let us see whether the finance minister delivers on this promise.
Nitin Desai
Former chief economic advisor
Former chief economic advisor
