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ShareMumbai: The Economic Survey for 2007-08 began on a self-congratulatory note, observing that, "the economy has moved decisively in to a higher growth phase... Macroeconomic fundamentals continue to inspire confidence. Buoyant growth of government revenues made it possible to maintain fiscal consolidation as mandated under the Fiscal Responsibility and Budget Management Act".
Some 16 months later, the Economic Survey for 2008-09 sings a different tune.
"No country, including India, remained immune to the global economic shock."
As a result, it admits that the tempo of economic activity had flagged to 6.7% from the preceding year's 9%.
The near-term outlook is cloudy and real GDP growth may be around 7%, though a jump of at best 7.75% is possible depending upon the monsoon and the speed of global -- and especially, the US -- economic recovery.
But in a display of optimism that knows not defeat, the document talks of the return to the fast track -- 8.5 to 9% -- soon subject to the removal of critical policy and institutional bottlenecks. It promises a revisit to "the agenda for pending economic reforms in the first instance with a view to renew the growth momentum".
While acknowledging the transmission of global economic crisis to our shores, the Survey implicitly concedes that, we, too, were not above board.
This becomes clear when it notes that the fiscal deficit as a per cent of GDP had increased from 2.7% in 2007-08 to 6.2% in 2008-09.
The difference, it says, constituted the fiscal stimulus but in the same breadth, added that, "some spending was on account of implementation of the Sixth Pay Commission Award and the Agricultural Debt Relief Scheme announced in the budget"
The cat is out of the bag. Expenditure had soared above the budgeted levels because the budget did not make a provision for them. As a recent RBI Bulletin had pointed out," a significant part of the additional spending was for items announced in the budget 2008-09 but no provision was made'.
In this light, when the Survey stresses the need to return to the fiscal deficit target of 3% "at the earliest", possibly by 2010-11, it fails to carry conviction.
Much of what the Economic Survey has to say about turning a new leaf in the matter of tax reforms, disinvestment, deregulation of sugar and fertiliser industry and ushering in a regime of free pricing of fuel is old hat.
Take the new thrust on disinvestment to generate Rs 25,000 crore to the exchequer. Will the sale of 10% stake in unlisted public sector enterprises materialise?
Or, the auctioning of those that cannot be revived? Again, misgivings are in order about the phasing out of kerosene supply subsidy and providing solar cooker/ lantern in every rural household which has no electricity.
The Survey refers to the need for decontrolling petrol and diesel prices while only a day earlier, the government had decided to pursue the same policy of old tinkering with diesel and petrol prices when a thorough policy overhaul would have been a right response.
It pleads for better targeting of food and fertiliser subsidies with even more reforms in regard to the latter by converting part-producer subsidy to wholly farmer-user nutrient related subsidy.
A new income tax code is promised and the phasing out of all cesses and surcharges on taxes as well as of the security transaction tax and fringe benefit tax is mooted.
Will these fructify? A Goods and Services Tax by April 2010 is the goal but the road is bestrewn with imponderables.
All these policy initiatives make economic sense and they have been enunciated earlier too. But, the government has been unable to bite the bullet.
Sad to say, Economic Surveys have been reduced to irrelevance and the latest one may be no exception.
As always, they expertly diagnose the ills of the economy, warts and all, and they also come with the right prescriptions to restore it to a semblance of health.
The crafting of the document vests with the highest echelons of the bureaucracy but the implementation of its recommendations lies with the political establishment.
Hence, there is many a slip between the cup and the lip.
Still, if the Survey is eagerly looked forward to, it is because of its utility as an authoritative source of information and data.
As an action plan, it is irrelevant thanks to the intrusive --- and banal --- role of politics. One hopes a better fate is in store for the Economic Survey, 2008-09.
