BUSINESS

Economic Survey: A welcome change

By Business Standard
February 29, 2008 08:54 IST
The finance ministry's Economic Survey for 2007-08, tabled in Parliament on Thursday, represents a significant and welcome change in focus.

In recent years, as the number of government economic reports coming out in the weeks and months before the Survey has increased, its utility has diminished as a source of data and as the ministry's assessment of the state of the economy.

The ministry itself publishes a Mid-year Review in time for the winter session of Parliament in December, while the Prime Minister's Economic Advisory Council publishes a review in January.

So, what more can anyone get in the extra month? A change of focus therefore would do quite nicely and that has happened with the addition of a full chapter entitled "Challenges, Policy Response and Medium-term Prospects".

This is essentially an expansion of the "Issues and Priorities" section that used to conclude the opening chapter and reflected the ministry's wish-list for policy reforms. However, the new chapter provides an analytical foundation for the issues that it addresses, which makes it more cogent and persuasive than a mere listing.

The analysis of inflection points in India's growth path provides a useful backdrop for the challenges to sustaining the growth rate that the chapter goes on to discuss.

The importance of clusters of reform in accelerating growth at key turning points is highlighted and this leads to a number of specific recommendations with respect to reforms in urban and rural infrastructure, the delivery of social services by both the Centre and the states and the future agenda for financial sector reforms.

Many of these do not have direct budgetary implications, but this new emphasis in the Survey does give the impression that the Budget is being formulated in the context of a long-term view of the links between reforms and sustainable growth.

That is re-assuring, and a luxury that the finance minister can afford, now that the short-term outlook is relatively comfortable. In Chapter 1, which addresses the state of the economy, the picture that emerges is one of both acceleration and stability, even as previously dormant threats are beginning to re-emerge.

A very strong positive development during this high growth phase is the substantial increase in both savings and investment. Growth has clearly moved from a one-horse (consumption) process to a far more powerful twin-engine (consumption and investment) one.

On the negative side, inflation in food prices has been causing problems for some time now and, if global trends are anything to go by, these problems could well intensify in the near future. The somewhat unconvincing reference to a "second green revolution" to significantly raise agricultural productivity does not offer any mitigation to an immediate threat.

Notwithstanding this, the Survey is relatively confident that "close monitoring and appropriate interventions" will be adequate to keep the pressure under check; the coming months will show whether this confidence is justified. 

The Survey points out, rather bravely, that the increased expenditure on social programmes does not find sufficient reflection in any changes in human development indicators.

It also points to increased unemployment levels (up from 6.06 per cent in 1993-04 to 8.28 per cent in 2004-05) despite rapid growth, but fails to square the sustained drop in per capita cereal and pulses availability with trends in poverty and hunger - these latter suggest an improving position. There are real issues in all this that need to be debated fully.

Economic Survey: Complete coverage

Business Standard
Source:

NEXT ARTICLE

NewsBusinessMoviesSportsCricketGet AheadDiscussionLabsMyPageVideosCompany Email