India's growth story set to rebound

India's growth story set to rebound

The Economic Survey 2014-15, presented by Finance Minister Arun Jaitley in the Lok Sabha on Thursday, is notable for the cheerful and rosy picture it presents of the economy. The document, which is tabled every year the day before the presentation of the Union Budget, reviews the performance of the economy in the past 12 months. It highlights the status of government initiatives and programmes and more importantly, looks at the likely movement of key economic indicators in the coming year. Often, the economic survey prepares the ground for the next day’s Budget and even creates a rationale for the proposals to be made in the Budget. It may also give an idea of the way resources are to be mobilised and how allocations may be made. It is also a statement of plans and priorities of the government to be achieved in the coming months.

The survey goes much ahead of the account of tentative growth presented by the mid-term financial survey of last year. Every economic indicator is robust. It forecasts a GDP growth of 8.1-8.5 per cent. Though the recent adoption of a new methodology to compute the GDP has been questioned, it is certain that the growth rate would be higher than that of the current year. It expects inflation to remain at about 5 per cent and hopes to meet the 4.1 per cent fiscal deficit target. With most economic risks now behind it, the government may be in a position to unveil a new set of reform measures in the Budget. The survey hints at that prospect and says that the political mandate it has got gives it the authority to take decisive steps to speed up the growth of the economy.

Such an outlook makes it likely that the government will announce some key reform measures in the Budget. It has hinted at a rationalisation of subsidies on food, fuels and fertilisers as it has stated that price subsidies do not seem to have had a transformative effect on living standards. The introduction of GST and the Make in India programme are high on the government’s priorities. The need to accelerate the disinvestment programme has been mentioned and the case for banking reforms has been underlined. This is particularly important because it will not be possible for the economy to grow further without major reforms in the public sector banking arena. It also envisages further softening of inflation and a milieu more favourable for investment. If these ideas are translated into Budget proposals, Jaitley’s Budget is likely to be an important event in economic policy-setting.
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