19-02-2013, 03:45 PM
SURVEY EMPHASISES THE NEED FOR RAPID FISCAL CONSOLIDATION
GROWTH RATE EXPECTED TO PICK UP IN 2012-13
ABSTRACT
The Economic Survey 2011-12 suggests policies to put India on a surer footing for
sustained, inclusive growth and all-round development. The Survey takes note of the
Government fighting malaise of inflation with numerous calibrated steps which constituted a
combination of policies to improve supply, especially of food and basic agricultural products
and curb fiscal and revenue deficits. Independently, the Reserve Bank of India tightened the
monetary policy. While the battle against inflation had some slowing down effect on growth,
there were no signs of major long-tem damage or rise in unemployment. The Government
thus is in a position to turn its attention more exclusively to inclusive growth, notes the
Survey. The Survey recommends that Government’s primary concern now has to be to
advance the economy’s productivity and improve income distribution.
The fiscal year 2011-12 saw several initiatives to improve agricultural productivity
and management of supply chains which have yielded results and contributed to containment
of food price inflation. Deregulation of savings bank interest rates since October 2011 have
contributed to control the Wholesale Price Index (WPI) inflation rate. The Survey suggests
that rapid fiscal consolidation is the only way out to keep inflation down and aim for robust
growth. “The principle way in which this has to be achieved is by raising our tax-GDP ratio
and cutting down wasteful expenditures”, says the Survey. The centre’s gross tax-GDP ratio
(BE 2011-12) stood at 10.5 per cent. “Our aim must be to cross 13 per cent by 2016-17”
adds the Survey. The Economic Survey 2011-12 also notes that critical task of inclusion
cannot be left to the free market. For Government the role has to be that of enabler, the
Survey reiterates
According to the Economic Survey 2011-12 the growth rate is expected to pick up
from the second quarter of 2012-13. “We expect growth in 2012-13 to be 7.6 (+/-0.25) per
cent” says the Survey. The Survey also projects “ in 2013-14 it is expected that there will be
further recovery for India and the nation will virtually be on the growth path it was on before
the global recession of 2008”. The major drivers of growth – the savings and investment
rates as percentage of GDP – after showing a down turn in 2011-12 will rebound quickly as
India consolidates fiscally and continues to rise slowly thereafter as the ratio of India’s
working age population to overall population rises because of the demographic dividend.
On the issue of ‘comparative rating index for sovereigns’ (CRIS), the Economic
Survey 2011-12 notes that India’s CRIS has seen a rise from 23.81 in 2007 to 24.52 in 2012.
Since the CRIS is a comparative rating score, it means that vis-à-vis the rest of the world,
India’s rating has risen by 2.8 per cent says the Survey. The changing profile of CRIS score
across the world tells a major story about the changing map of the world economy in which
emerging economies are moving into centre stage and becoming drivers of the global
economy, notes the Survey.
With respect to investment in infrastructure sector, the Survey points out that
Planning Commission has talked about a target of one trillion dollars of infrastructural
investment during the Twelfth Five-Year Plan with about half of this being raised from the
private sector.
The Economic Survey 2011-12 recommends contracts as central driver of modern
economy. It also sees benefits of transparent pricing formula over price control. The
Survey also says that land acquisition issues are vital for India’s manufacturing and industrial
sector. “Keeping in mind the incentive structure in markets, the government’s aim must be to
create a level playing field, provide the essential infrastructural facilities and a noninterfering
bureaucracy and then enable the industrial sector to flourish on its own”
recommends the Survey.