The Economic Survey has a reputation for presenting a candid review of the Indian economy along with prospects for the forthcoming year. More importantly, a recently acquired USP has been the enumeration and scope of medium-term policy priorities for the government.
Last few surveys highlighted the importance of economic themes like the JAM Trinity, the Chakravyuha Challenge, the Twin Balance Sheet (TBS) problem, and the need for structural tax buoyancy in taxation. In the same spirit, this year’s Economic Survey has taken a step further and emphasised the need for realising ambitions on growth, employment and social justice by addressing three major challenges:
UBI to lower inefficient redistribution
While the government has made progress in improving redistributive efficiency via the JAM platform, the sheer spread of developmental schemes imposes intrinsic limitations on effective targeting. In this context, the Survey has introduced the transformational idea of a Universal Basic Income (UBI) for India. While the concept needs a rigorous policy debate, its potential merits in the area of lowering the administrative burden and improving administrative efficiency makes it a superior option for poverty reduction.
Augmenting state capacity and market regulation
While the government has espoused competitive federalism for attracting investments and talent, its impact on delivery of essential services remains inadequate. Specific areas like health and education lack state role models and hence, the Survey makes a case for competitive service delivery as a counterpart for competitive populism. In addition, the Survey also points towards the need to broaden the scope of competitive federalism to competitive sub-federalism.
Protecting property rights and embracing the private sector
The Survey makes a fervent appeal to shed policy ambivalence in areas like strategic disinvestment, resolution of TBS problem, legacy issues in taxation, IPRs in agriculture, reforms in civil aviation and fertiliser sector, etc.
While highlighting these medium-term priorities, the Survey also acknowledges the proximate macroeconomic challenges from higher global commodity prices, subdued private investment appetite, weak external demand conditions, and demonetisation. As such, it expects FY17 GDP growth to moderate towards 6.50-6.75% from 7.6% in FY16.
The Survey highlights the need for fiscal policy to balance the short-term requirements of an economy recovering from demonetisation against the medium-term necessity of adhering to fiscal discipline and credibility. With respect to potential one-off gains from demonetisation, the Survey recommends use of this wealth effect towards strengthening of the government balance sheet.
The Economic Survey paints a realistic economic picture and accentuates upon the need to build upon past reforms through some out of box ideations. While the Survey refrains from making explicit fiscal recommendations, it does point towards the need for India to chart out its own fiscal course within the ambit of prudence and discipline. I hope that the upcoming Union Budget will carry this ethos to propel India towards a sustainable growth path of 8+% within the next two years.