Now for the UPA to get down to brass tacks

Updated: Feb 26 2005, 05:30am hrs
Economic Survey 2004-05 is a refreshing mix of idealism and realism. While lauding the performance of the economy during the last year, it does not turn a blind eye to the challenges ahead. On the contrary, it puts the choices before the country quite starkly.

Nowhere is this more evident than in the context of what it has to say about infrastructure. Government production of infrastructure services, it admits, introduces difficulties concerning technical efficiency, adequate scale of investment, proper enforcement of user charges and competitive market structure. And then, in a surprising burst of candour, adds that when government provides these services it runs the risk of infrastructure being misaligned with user priorities and linked more to political interventions and budgetary compulsions.

Such honesty from the government is rare indeed. Hopefully, and more importantly, it is also an indication that the government intends to do something. And that is reason to feel optimistic.

The same pragmatism is reflected in other areas as well. Take, for instance, the question of agriculture subsidies. This has long been a contentious issue and is only more so in a coalition government, dependent on the Left for survival. But the Survey does not mince words. Given the compulsions of fiscal consolidation, the choice as it puts it, is between subsidy for price support to crops, fertilisers, irrigation and power on the one hand and higher public investment in supportive infrastructure for irrigation, roads electrification, agricultural extension and research on the other hand.

The message is clear. Declining public investment in agriculture, one of the main reasons why the sector is so vulnerable to the vagaries of the monsoon, cannot be reversed if status quo continues. As long as subsidies are pre-empted by a small privileged class, the vast majority will suffer. It is hard to recall whether any of the Surveys presented by previous governments has ever articulated the dilemmas so cle-arly, or so simply.

On WTO too, the Survey is matter-of-fact. The Left parties have made no bones about their unhappiness with globalisation and institutions like the WTO that they see as the agents of capitalism. The Survey, however, makes no attempt to pander to their blinkered vision.

The Economic Survey is a frank assessment of the challenges ahead
It lists out the key issues and the priorities
The governments job now is to stick to the script
The major challenge, it says, is to try to remain with the system and at the same time protect the interests of Indian farmers effectively. Thats a statement even the most diehard liberal cannot quarrel with. Not in a country where more than 65% of the population derives its livelihood from agriculture and the share of the sector in gross domestic product has been falling steadily. Since 2001-02, the share of agriculture in GDP has declined by as much as 3.5 percentage points.

There are other instances of level-headed thinking. Small scale reservation, the Survey acknowledges, has not succeeded in producing expected results and has constrained investment in critical sectors with large growth potential. As such, it concedes there is little justification for continuance of reservations.

Fiscal consolidation is another area that has long defied solution. Here too the survey is honest to a fault. Initiatives undertaken in successive budgets have not met with much success in reducing deficits, it says, mainly because of lack of accountability in fiscal marksmanship. Not too many governments have been willing to concede what the Reserve Bank of India has long been harping on.

The Survey recognises that private participation mitigates risk for the public sector. But goes on to warn that complete reliance on the private sector in an unregulated market is not likely to produce sound results, mainly due to difficulties in the regulatory environment. Its answer, one that we whole-heartedly support, is to find an appropriate policy framework that will enable public-private partnership in the infrastructure sector.

In a not so subtle acknowledgement of the ability, nay superiority, of the market mechanism to deal more efficiently with the pricing of even scarce commodities, the Survey acknowledges the need for a fresh policy on spectrum allocation. And in a reference bound to make its red allies see red, goes to say the fresh policy impetus must be to reduce the extent to which a state-led planning approach is used in the utilisation of the spectrum!

For the rest, the Survey acknowledges the economys strong macro economic fundamentals and lists out the five key priorities for consolidating the growth process. One, stepping up investment in agriculture and allied activities. Two, simplifying procedures and relaxing entry-exit barriers. Three, making access to finance easier. Four, improving infrastructure and five, allowing higher foreign investment.

This then is a document from a government that is not in denial. It accepts the many limitations in todays scenario and does not shy away from putting these down in black and white. Even if in the process it does not come off too well. And that is half the battle won.

The problem with the Economic Survey is that it is, at best, a wish list of the government. Or, rather, of the finance ministry and within the ministry, of the Economics Division. As such, it has the luxury of pronouncing policy intent without being unduly hampered by realpolitik. To the extent, however, that it reflects the essential thinking of the government, it is a good blueprint to work on.

The government has been bold enough to enunciate many things that are anathema to its Left partners. And in the past few days, has suited words to action by hiking the FDI limit in sectors like telecom and real estate. All it need do now is stick to the script.