A Patchwork Survey

Updated: Feb 28 2003, 05:30am hrs
The Economic Survey 2002-03 bears a striking resemblance to the earlier ones as it is only a collation of updated reports submitted by various ministries with the overall review done by the chief economic advisor (CEA) in the Union finance ministry. This patchwork character is in sharp contrast to the extremely competent Mid Year Review of the Economy written solely by the CEA. Given this, one cannot make much of a muchness about the latest Survey. More importantly, it doesnt offer a perspective on the medium-term slowdown of the Indian economy. This issue is also conveniently ducked unlike in the Economic Survey 2001-02 through a focus only on the expected slowdown of growth in gross domestic product (GDP) to 4.4 per cent this fiscal. This also happens to be the first year of the Tenth Plan (2002-07) which has adopted an ambitious growth target of 8 per cent. When there has been such a sharp slippage, what indeed are the prospects of hitting the plan target at all The Survey argues that it is indeed feasible given the international and Indian experience. That, however, is not the point. It is not the potential feasibility of 8 per cent growth that is being questioned, but the feasibility of that target being attained in the Tenth Plan period. The Survey again ducks that issue. Interestingly, one of its important charts showing annual GDP growth stops at 1996-97 precisely the period from which the medium-term slowdown set in and which persists to this fiscal. This is reflected not just in annual growth of agricultural and industrial value added but also domestic saving and investment rates.

But how to address this medium-term problem Last years Survey highlighted the flagging pace of economic reforms and the imperative of stepping it up. This years Survey focuses instead on the key growth drivers of technology and competition, together with benchmarking to the best international practices, exemplified by the information technology and automobile boom. This must extend to agriculture as well. Doubtless, such a virtuous interaction also needs an enabling environment and is facilitated by appropriate infrastructure, a suitable regulatory framework and macroeconomic stability. As for the last-mentioned, the Survey appears to jump the gun by claiming that India is already moving towards it! Far from it, considering the intractability of fiscal deficits of both the Centre and states. This preempts valuable resources and crowds out private investment, all of which prevent the government from generating internal budgetary surpluses for capital formation to kickstart overall growth. Unless fiscal consolidation takes place, medium-term growth impulses will remain sluggish. That being said, there are positives in the Indian economy that must be recognised. The Survey correctly highlights the resilience of the economy especially with the huge volume of foreign exchange reserves, strong external profile and large food stocks to weather the on-going escalation of tensions in West Asia and probability of war breaking out. But the governments major challenge is not merely to establish the robust foundations of growth this fiscal but also to reverse the slide over the last five to six years. Addressing this objective, however, requires an overall framework rather than a patchwork exercise of merely updating the publications various chapters with the latest information.