Here’s Clar­ity, Find Po­lit­i­cal Courage

That is the mes­sage the Eco­nomic Sur­vey of­fers

The Economic Times - - The Edit Page -

Gone are the days when the Eco­nomic Sur­vey used to be a dull list­ing of facts and fig­ures, ex­cept for the first chap­ter on the way for­ward. Sur­veys have evolved into a lengthy but lively de­bate on chal­lenges, cur­rent eco­nomic wis­dom, the global dis­course and de­sir­able pol­icy al­ter­na­tives. The 2016-17 Sur­vey takes this trend to a new level and de­serves study long af­ter the Bud­get rush.

The Sur­vey finds that eco­nomic growth this year has been im­pacted by de­mon­eti­sa­tion, up to 1% in nom­i­nal terms and up to 0.5% in real terms. That es­ti­mate of de­pressed nom­i­nal growth puts a num­ber to the in­come lost to de­mon­eti­sa­tion: 1% of the 2015-16 GDP, or 1,35,761 crore. The Sur­vey is can­did in ad­mit­ting that of­fi­cial GDP num­bers could un­der­es­ti­mate the im­pact on the in­for­mal sec­tor, worst af­fected by cash short­ages. Yet, it hopes that in­creased trans­parency, re­duced cor­rup­tion and grow­ing dig­i­tal­i­sa­tion would make the ex­er­cise boost fu­ture growth. But to re­alise that po­ten­tial, it iden­ti­fies con­di­tions that are hard to meet: re­laxed tax en­force­ment (raids and ex­ten­sive scru­tiny are un­der­way), lower taxes and stamp du­ties, and real es­tate un­der GST, be­sides swift re­mon­eti­sa­tion. Growth is cir­cum­scribed by ad­verse global de­vel­op­ments — a ris­ing dol­lar, ris­ing in­ter­est rates, ris­ing crude prices, in­tol­er­ance of ex­ports and a wob­bly China — and In­dia’s twin bal­ance-sheet prob­lem. Banks are laden with dud loans and com­pa­nies have loans they can­not ser­vice. The Sur­vey’s call for debt for­give­ness is a po­lit­i­cal hard-sell. Rather than yet more as­set re­con­struc­tion com­pa­nies, what is needed is to ex­pe­dite rules for the Bankruptcy Code and let the mar­ket for cor­po­rate con­trol and cor­po­rate as­sets work.

But state ca­pac­ity to reg­u­late markets is a weak­ness the Sur­vey iden­ti­fies as a ma­jor prob­lem. On the fis­cal deficit, the Sur­vey opts for dis­ci­pline, rather than us­ing pub­lic in­vest­ment to boost growth, although growth is con­strained by anaemic pri­vate in­vest­ment. Clearly, in­vest­ment trumps uni­ver­sal ba­sic hand­outs when the in­vest­ment rate is lower than at any time since 2004-05.

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