The annual Economic Survey is traditionally tabled in Parliament a couple of days before the Budget is presented. This year, the attention being paid to budgetary prospects is particularly high; consequently, the Survey has come under the spotlight far more than in a more ‘normal’ year. That said, the utility of the Survey as an assessment of the state of the economy has dwindled over the years, as the frequency with which economic data is released has increased (monthly fiscal deficit numbers, quarterly GDP assessments, regular tax revenue updates, et al), and as the number of institutions putting out similar reports has multiplied. In such a context, there is very little that the Survey can disclose regarding macroeconomic conditions that is not already known.
If the document retains interest, then, it is for the policy changes that it advocates, even if the evidence of the past many years suggests that many of the policy proposals in the Survey never see the light of day. This is Chief Economic Adviser Arvind Virmani’s second survey. Last year, he introduced the novelty of an exclusive chapter on long-term growth prospects. This time round, that extra chapter lays out a reform agenda for the new government against a backdrop of significant global and domestic challenges.
Several sets of reform measures are indicated as appropriate responses to each major challenge. Very few of these, if any, are entirely new; many of them have been on similar lists since the reform process began in 1991. Nevertheless, there are two reasons why the agenda should be taken with some seriousness. One, the opportunity for reform is clearly more tangible than it has been for a while, given the combination of electoral outcomes and economic turbulence. Two, and very significant, is the signal emanating from government that no reform idea is off the table. Even things that most people had written off for good, or as being political touch-me-nots, have made it to the Chapter 2 lists. FDI in multi-brand retail, curbing fertiliser and cooking fuel subsidies, aligning interest rates on post office savings with the market — these are just a few of the things that at least the finance ministry’s economic division believes should be done, including interestingly enough a call for the abolition of some of the vexatious taxes introduced by P Chidambaram, like the fringe benefit tax!
But, as always, implementation is another matter altogether and this is where scepticism legitimately arises. The Survey simply bundles several measures together without either prioritising (which it could have done) or strategising (in all fairness, not really its job) them. Fortunately, there is a significant agenda for the finance ministry itself, which should have the greatest likelihood of being implemented. The issues range from disinvestment to abolition of some taxes to foreign investment in insurance to the implementation of the goods and services tax to an amendment to the fiscal responsibility mechanism incorporating cyclically sensitive deficit goalposts. Of course, the Budget will reveal some of what the government will actually do but, for the moment, it is reassuring to know that the reforms agenda is not constricted at the drafting stage itself.
