On the first of June last year, while presenting the first budget by a BJP-led government, the Finance Minister made a list of the key objectives of his budget. These included a) strengthening the foundations of the economy to deal effectively with an uncertain external environment; b) reversing the decline in agricultural production; c) restoring the momentum of industrial growth; d) accelerating the development of infrastructure; e) strengthening India's international economic position through the revival of exports and reduced reliance on borrowed funds; f) ensuring macro-economic stability and control over inflation; g) raising the rate of domestic savings to achieve higher national investment, and supplementing this effort through foreign investment. The Economic Survey charts the extent to which these objectives have been realised.

First, the GDP growth figures. The 5.8 per cent growth estimate, which was released earlier, is entirely the result of the higher growth in agriculture, which is, at least partially, statistical in nature. In 1998-99, agricultural growth was a negative 1.0 per cent, far below the average trend of growth. The decline in agricultural growth has therefore been reversed, although Mother Nature, rather than Yeshwant Sinha, should get the credit for that.

Second, the Survey says that, "with the exception of agriculture, all other major sectors of the economy had decelerated." Industrial growth has decelerated to 4.7 per cent, compared to 5.9 per cent in 1997-98. Almost all segments of industry have been affected, although the survey points to increasing production of capital goods. For the first nine months of the year, capital goods output increased by 9.8 per cent, compared to 6.7 per cent in the corresponding period of 1997-98. Under the head of capital goods, shipbuilding, automobile ancillaries, railway wagons and passenger carriages have recorded substantial growth in output. However, apart from capital goods, sectors such as basic goods, intermediates, consumer durables as well as non-durables, mining, and electricity have all shown negative growth.

Third, although plan outlays on infrastructure had been increased substantially in the last budget, that was not sufficient to stem the decline. The survey points out that electricity generation has remained steady, crude oil production witnessed a negative growth rate, while rates of growth for coal, cement and refinery products also declined. While the survey points to the growth in telecommunications, and the ports sector showed marginal growth, revenue earning goods traffic on railways showed a negative growth rate.

Fourth, exports have decelerated by over 5 per cent in the first nine months of the year. The balance of payments position has held steady in spite of the decline in exports because of the "mopping up of $4.2 billion through Resurgent India bonds." That is clearly an increased reliance on borrowed funds. The balance of payments has also been bailed out by low oil prices, which have led to POL imports being lower by 26 per cent for the first nine months of this year.

Fifth, the containment of inflation was achieved inspite of the government's best efforts. Money supply and reserve money have been growing at 19 and 17 per cent respectively. Fiscal profligacy continues unabated. The survey acknowledges that it is the presence of excess capacity, together with competitive pressures from low worldwide commodity prices that have helped contain inflationary pressures.

So far as macroeconomic stability is concerned, the survey warns against the fiscal deficit, and says that the growth in the level of public debt is unsustainable. It has sent a strong warning about the government finding itself in a debt trap.

Sixth, while the savings figures for the year are not available, the foreign investment figures do not augur well for growth. The survey points out that FDI inflow during the first nine months of the year was a mere Rs 880 crore, against Rs 4253 crore in the corresponding period of the previous year. The finance minister had said in his budget speech that he hoped to double the inflow of FDI within two years.

A look now at some of the other promises made in last year's budget. The urea subsidy has finally been reduced, but the price increase is a mere 40p per kg, not enough to redress the skewed NPK ratio. In fact, the shortage of phosphatic fertilisers during the year would have led to a worsening of the ratio.

The FM had also said in his budget speech that he expected an early financial closure of the fast track power projects. None of these projects are yet close to financial closure. The FM had also mentioned the huge dues of the state electricity boards to NTPC and Coal India, and mooted a scheme for securitising the debt. That scheme is yet to take off and, in the meantime, dues from state electricity boards have increased to Rs 14,800 crore by end-September 1998.

The Economic Survey, and its warnings, all indicate that the objective of strengthening the foundations of the economy is very far from being realised.