The Economic Survey for the year 2007-08, the economic report card of the government revealed a day before the Union budget, gives a balanced picture of the economy. While on the one hand it shows that the Indian economy is fundamentally strong, on the other it spells out concerns that can jeopardise the country’s growth momentum, to some extent, in the future. The government has admitted that the economic growth in 2007-08 has slowed down to 8.7 per cent from 9.6 per cent a year ago, mainly on account of lower industrial production and slower agricultural growth. The imminent slowdown in the US economy due to the subprime crisis, which has led to huge losses for many banks and financial institutions in the West, was correctly pointed out as another major concern.

Then there are many related issues like taming the capital inflow which has pushed up country’s forex reserve to an unmanageably high $281 billion. Nearly 10 per cent appreciation in rupee against dollar has made exports from India non-competitive. But the biggest worry of the government is the lower growth in the agricultural sector. Production of foodgrains, according to the Survey, is likely to grow only around 0.90 per cent in 2007-08 against 4.2 per cent last year. With more than half the population directly depending on the agrarian sector, low agricultural growth has serious implications for the country’s overall growth, the Survey rightly noted.

It is also correct that the pace of infrastructure development in the country is hopelessly behind the demand for infrastructure. Since the development of adequate infrastructure is a critical pre-requisite for sustaining the growth momentum, the Survey points out the need to mobilise huge amounts of resources to correct the mismatch. The Survey has also highlighted the urgent need for a second round of reforms in economic policies for a faster GDP growth.

It has insisted that in order to reach a double digit growth rate, we must open up the retail sector to foreign direct investment (FDI), raise the FDI limit in insurance to 49 per cent and allow 100 per cent FDI in new private rural agricultural banks. These are controversial proposals on which there is no consensus even within the ruling UPA and the parties that support it and therefore cannot be taken seriously. And it cannot be expected that the governmet will be able to muster the required political backing for them in the remaining period of its tenure.