Economic Survey takes a bold, realistic view

The Economic Survey 2015-16 presented by Union finance minister Arun Jaitley straddles a bold and realistic new path that is more in line with Prime Minister Narendra Modi’s vision of an India of the future. It bears the stamp of chief economic adviser Arvind Subramanian, from cutting down subsidies, focusing on agriculture and widening the tax base to suggesting the easing of monetary policy and liquidity considering the benign inflation, gap in industrial output, uncertain growth and high corporate indebtedness. It is more realistic about growth this fiscal than it was last year and trims GDP to 7-7.5 per cent from 8 per cent. But it says India has the capacity to grow 8-9 per cent in the near future. Echoing the Prime Minister’s observations, it points out that the super-rich enjoy subsidies of `1 lakh crore on seven commodities — small savings schemes, cooking gas, railways, power, aviation turbine fuel, gold and kerosene. The gold statistics are revealing and contrary to the belief that the poor are big consumers of the precious yellow metal. The top 20 per cent of the population accounts for roughly 80 per cent of total gold, yet gold is only taxed at about 1-1.6 per cent (states and Centre combined) compared to about 26 per cent for normal goods. The same pro-rich policy is seen in the imposition of excise duty. In short, 98 per cent of the subsidy goes to the better off and two per cent to the bottom three per cent. The Survey says the government will be in a position to achieve the 3.9 per cent fiscal deficit target but will have a problem the following year because of the weakness in the global economy. Whether the government will stick to the fiscal deficit target is in doubt as there is a growing clamour for postponing it in favour of more spending to revive the economy, much to the chagrin of RBI governor Raghuram Rajan. If the economic survey is a forerunner to what to expect in the Union Budget, then the corporate sector is in for tough times as Mr Modi has said that subsidies (revenue foregone) amount to `62,000 crore and should be cut down. The Survey has done well to focus on agriculture because it is barely two per cent of GDP and 42 per cent of the population depend on agriculture for income. Whilst it talks of the need to boost irrigation, it acknowledges that the bulk of farmers depend on the monsoon and are at nature’s mercy. But just stressing on the necessity of the crop insurance scheme seems inadequate. The Survey says the current non-performing assets of banks are not sustainable and suggests that banks sell stressed assets. It cautions the government should not depend on export to finance the current account deficit and is confident that inflows are comfortable enough.

If the economic survey is a forerunner to what to expect in the Union Budget, then the corporate sector is in for tough times as Mr Modi has said that subsidies amount to 62,000 crore and should be cut down.