The surveys composure on inflation, expected to stay moderate in the months ahead, may surprise some onlookers. The only risk, in its view, is a possible failure on domestic supply management, which is becoming even more critical in containing inflationary expectations as global commodity prices soar. The surveys inflation confidence is suspect mainly because the agriculture sector has not achieved a new plane of sustainable growth, as it too admits. The sector is troubled both by exogenous factors like climate change and endogenous ones like reduced capital investment and plateauing of yields of major crops. Reiterating the need for a pickup in farm output for the sake of food security and price stability as much as inclusive growth, the report adopts a refreshingly new stance in outlining backward and forward linkageswhich would enhance productivity through efficient resource useas a way out. But the big question is whether the political establishment would risk such lofty long-termism in an election year, since quick returns are what count. Other recommended policies, like building an outcome-oriented perspective for implementing public programmes in the agriculture sector, would also call for long-term planning.
The survey also strikes a different note on the manufacturing slowdown underway right now. It holds the consumer durables downturn responsible for the industrial deceleration, but also states that the slowdown shown by the available data on consumer durables may not in itself be a serious concern, so long as overall growth buoyancy is intact. The big task to be achieved in the manufacturing sector, according to the survey, is the effective easing of infrastructure constraints. As usual, labour market inflexibility finds a mention here, with the need for reforming labour laws and regulationsespecially for the promotion of labour-intensive industriesput across in the quaint, delicate language of a seasoned coalition dharma artist.
In terms of stacking up platitudes, however, the winner is the surveys discussion of infrastructure projects. Some of it reads like a pep talk to rally the disheartened. The challenges, it proclaims, are by no means insurmountable. It reminds readers that the growth of different sectors of the economy is contingent on physical infrastructure and related services. This air of exhortation carries over into the social sector section. This lists all manner of programmes for the upliftment of the countrys suffering have-nots, but places the burden of delivery squarely on the states and district administrations, absolving the Centre of direct responsibility and hoping that high-minded moral suasion would work magic.
The most inscrutable part yet is the surveys take on the external sector. Noting that flagging exports call for policy shifts, it recommends such booster shots for merchandise trade as the continuation of customs duty cuts, weeding out of exemptions, streamlining existing export schemes, checking the proliferation of SEZs and maximisation of gains from bilateral trade pacts. For services, it wants domestic regulation reforms and better market access. Though the survey takes a liberal view on capital account convertibility, it pushes the deadline almost indefinitely by making the convergence of global and domestic interest rates a sine qua non for this. As for the rupee, it asks for a balanced policy.