Survey pins hopes on economic revival

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New Delhi: Indian Government’s Economic Survey 2008-09 has given the hope of revival of the economy saying that it has “shock absorbers” that will facilitate early revival of growth. Banks are financially sound and well capitalized. The foreign exchange reserves position remains comfortable and the external debt position has been within the comfort zone.

It said “the rate of inflation in prices has since abated and provides a degree of comfort on the cost side for the production sectors. Agriculture and rural demand continue to be strong and agriculture production prospects are normal.”

According to the Survey while there are indications that the economy may have weathered the worst of the downturn, in part, due to the resilience of the economy and also various monetary and fiscal measures initiated during 2008-09, nevertheless, the situation warrants close watch on various economic indicators including the impact of the economic stimulus and developments taking place in the international economy.

It suggested taking policy measures that squarely address the short and long term challenges which would help achieve tangible progress and ensure that the outlook for the economy remains firmly positive.

The Economic Survey noted that during the last two years, Indian economy had been buffeted by three major challenges originating in its external sector. First, a surge in capital inflows which reached a crescendo in the last quarter of 2007-08.

Second, an inflationary explosion in global commodity prices which began even before the first challenge had ebbed, that hit us with great force in the middle of 2008. There was barely any time to deal with this problem before the third challenge, the global financial meltdown and collapse of international trade hit the world with severity.

“Each of these, however, has implications for medium-term, that requires a considered and integrated response if our objective of sustained high growth is to be realized. An analysis of the impact of these shocks brings to the fore the importance of pursuing reforms, including in the financial sector, to make the economy more competitive and the economy regulatory and oversight system more efficient and sensitive to new developments,” it said.