India in sweet spot with lower deficits: Economic Survey
It predicts a growth rate of up to 8.5 per cent in 2015-16
By : DC Correspondent
Update: 2015-02-28 07:34 GMT
New Delhi: A bullish Economic Survey 2014-15 of the Narendra Modi government envisages “acche din” with the Indian economy growing by double digits, helping in “wiping every tear from every eye” and big bang reforms over time. It predicts a growth rate of up to 8.5 per cent in 2015-16 (based on the new series), making India the fastest growing economy in the world.
The Economic Survey says a political mandate for reform and a benign external environment (led by a steep fall in crude oil prices) have created a momentous opportunity for the first-full fledged Modi government Budget to be presented on Saturday by finance minister Arun Jaitley.
It says facts and fortune have aligned in India’s favour and the country “has reached a sweet spot rare in the history of nations in which it could finally be launched on a double-digit growth trajectory”. For the neo-middle class; the Survey promises “opportunities for young, middle-class and aspirational India to realise its limitless potential”. It says that while daunting challenges endure, the strong political mandate for economic change has imbued optimism that they can be overcome. “India, in short, seems poised for propulsion”.
In contrast to the Mid-Year Economic Analysis, the Survey asks the Centre to follow fiscal consolidation and adhering to its medium-term fiscal deficit target. With corporate investments down and no buoyancy in government taxes, the question arises from where the money for growth will come in. Here the Economic Survey expresses the hope that what roads and highways investment did during the NDA government under Atal Behari Vajpayee, railway investments will do during the Modi government.
“The present government can now do for the neglected railways sector what the previous NDA government did for rural roads. This impetus has the potential to crowd in greater private investment, and do so without jeopardising India’s public debt dynamics,” says the Survey.
On reforms, it asks the government to follow boldness in areas where policy levers can be more easily pulled by the Centre. It should be combined with incrementalism in other areas that can cumulate over time to big-bang reforms. “That is the appropriate standard against which future reforms must be assessed,” it said. It says that India needs to follow “a persistent, encompassing, and creative incrementalism, but with bold steps in a few areas that signal a decisive departure from the past and that are aimed at addressing key problems such as ramping up investment, rationalising subsidies, creating a competitive, predictable, and clean tax policy environment, and accelerating disinvestment.”
The Survey says that in the short run, growth will receive a boost from lower oil prices, likely monetary policy easing and lower inflationary expectations and a normal monsoon.
It predicts that the economy is likely to over-perform on the RBI’s inflation target by about 0.5-1.0 percentage points, opening up the space for further monetary policy easing. It estimate CPI based inflation for 2015-16 be in the 5-5.5 per cent range. The Survey says India can meet its short-term imperative of boosting public investment to revitalise growth with the need to maintain fiscal discipline by expenditure control and by switching expenditure from consumption to investment.
The Survey said that cash-based transfers based on the JAM number trinity, Jan Dhan, Aadhaar, Mobile offer exciting possibilities to effectively target public resources to those who need it most. It said that cash transfers can also augment the effectiveness of existing anti-poverty programmes like the MGNREGA. The current account deficit is expected to fall below one per cent in the next fiscal year on the back of easing of global commodity prices including petroleum products, the Economic Survey added.