M A I N   N E W S

GDP projected at 6.9 per cent
Economic survey stresses on fiscal consolidation
Gaurav Choudhury
Tribune News Service

It called for vigorous efforts to step up public investment, particularly in the areas of agriculture and infrastructure if the economy is to grow at a sustained rate of 7 to 8 per cent as envisaged in the National Common Minimum Programme (NCMP).

“It is doubtful that the targeted high growth can be achieved with the current levels of investment. Even after its increase in the last two years, the investment rate continues to be not only far below than that in China and East Asia but also lower than that assumed in the Tenth Plan”, the survey contended.

Moreover, although the prospects of rabi crops are good, the second advance estimates of foodgrain production made by the government indicate a fall of six million tonnes from last year’s level of 212 million tonnes. The decline in foodgrains production this year, however, is unlikely to adversely affect the buffer stock.

Institutional credit continues to remain an area of concern and there are several gaps in the system, including inadequate provision of credit to small and marginal farmers, paucity of medium and long-term lending and heavy dependence on borrowed funds by major agricultural credit purveyors.

The survey desired having an appropriate fiscal support mechanism for agriculture if the dominant agrarian sector is to move beyond its “centuries old dependency on monsoon”.

Under the global trade framework as mandated by the WTO, the major challenge is to remain within the system and protect the interest of Indian farmers. “The only option available is to seek the inclusion of those provisions in the agreement, which would provide sufficient protection to Indian agriculture”.

The survey sought relaxation in the entry and exit norms for firms and stressed that the reservation policy in the small scale sector has failed to yield the desired results. “There is little justification for the continuance of such reservation since all such items are now freely importable”.

The outlook for the industrial sector remained positive and will brighten further if constraints like infrastructure bottlenecks, labour market rigidities, entry and exit barriers, land acquisition and multiple levels of approvals are removed. There is also a need for improved Centre-state interface for better coordination between the Centre and the state governments.

As regards foreign direct investment (FDI), the survey pressed for further liberalisation of the FDI regime, including that of the politically contentious retail sector. “There is a need to establish a transparent, broad and effective enabling policy environment for investment and to put in place appropriate framework for their implementation”, the survey said.

On retail it said: “Organised retail formats will also help in upgrading the quality of products, establishing efficient supply chains from the farm to the market and generating greater employment”.

The survey drew pointed attention to “infrastructural inadequacy constraining economic growth”, particularly in backward states. There was, therefore, a need to set up an appropriate public-private partnership policy framework for the core infrastructure sectors such as telecom, roads, ports and civil aviation.

Even as the government has identified social sector development as a high priority area, the Economic Survey said that the availability of resources alone cannot guarantee social sector development. The efficacy of large number of government programmes on the ground would have to be vastly improved through various measures.