New Delhi, July 9
The Economic Survey has flagged raising the tax-GDP ratio and furtherance of subsidy reforms as a key for fiscal consolidation.

The Survey placed in Parliament today by Finance Minister Arun Jaitley has listed several reform measures that can be pursued to achieve a 7-8% growth rate in coming years.

Tax reform in India can improve the ease of doing business and promote efficiency. The Survey notes that the tax-GDP ratio of the government must be obtained through a burden-sharing mechanism where low rates apply on a broad swath of population, through effective enforcing mechanisms.

The Survey says taxes like cess, surcharge, transaction tax and taxes imposed for ease of collection like dividend distribution tax (DDT) need to eventually go. It also notes that exemptions and rebates given under the industrial policies of states are creating distortions.

Citing the fertiliser subsidy, the survey says it has a created a distortion that has hampered productivity. This has hampered private investment in urea and increased reliance on imports. The fertiliser subsidy hurts everyone — farmers, firms, taxpayers and consumers, the Survery notes.

While growth has been pegged much higher at 5.4-5.9%, the risk factors remain the poor monsoon and the geo-political situation that could elevate oil prices.

To regain the growth momentum in the economy, the prescription is to restore fiscal balance and enhance efficiency. It will take two years to achieve 7-8% growth, the Survey notes.

While India has a huge demographic advantage, the survey points out that policymakers have to design and execute development strategies that target this young population. “Demographic advantage is unlikely to last indefinitely”, it said.

The Survey talks about creating the enabling framework for a market economy. It also compares the differences between a command and control economy and market economy. Given the fact that India for many years was a command economy, it spells the Modi government’s vision on creating a market economy.

In a market economy, the government only interferes when there is a market failure implying monopolies and other aberrations. It says the liberalisation of 1991 only focused on industry and there has been no development of a national food market and farmers have to sell under the APMC Act.

Identifying the problems in infrastructure, the Survey notes that they combined together to result in a number of stalled projects, a balance sheet crisis for many infrastructure and natural resources companies and difficulties for banks that have lent to them. “The first wave of infrastructure investment in India has been grounded in an array of design flaws that now need to be addressed”, it adds.

Reform measures The Survey says taxes like cess, surcharge, transaction tax and taxes imposed for ease of collection like dividend distribution tax need to go To regain the growth momentum in the economy, the prescription is to restore fiscal balance and enhance efficiency

New Delhi, July 9
The first Economic Survey of the Modi Government calls for raise in public spending on health and education while suggesting massive revamp of the previous regime’s flagship programmes in the sector for better outcomes. The Survey calls for revisit of the Right to Education Act’s norm to set up one primary school within 1 km radius of habitations, terming the practice unproductive by way of mushrooming of schools without quality inputs.

The government’s first policy direction document stresses restructuring of government’s elementary education programme Sarva Shiksha Abhiyan (SSA) and the flagship National Rural Health Mission (NRHM) pointing to lack of linkage between money spent on these and outcomes achieved.

So far as education goes, while public spending on the sector as a percentage of the GDP rose from 2.9 in 2008-09 to 3.3 in 2013-14, the Survey says “there is need to not only increase it further but also address quality issues in education”.

The BJP had in its election manifesto promised to increase public spending on education to 6% of the GDP. The Survey has set the same direction for policy makers asking them to frame policies for the youth who will form 64% of Indian’s population by 2021.

Government expenditure on health remains woefully low increasing from 1.3% of the GDP in 2008 to just 1.4% in 2013-14. Here, the Survey says, “A lot more needs to be done to provide quality and affordable healthcare to all.”

It calls for strategy shifts in the way SSA and NRHM are run. It presents data to say that while public spending on schoolchildren has risen from Rs 5,203 per child per month in 2007-08 to Rs 11,418 per child per month in 2011-12, there hasn’t been corresponding increase in enrolment of children in government schools.

“Public schools are free and government spends more than Rs 1,000 per child per month to run them. Between 2008 and 2012, where expenditure per child in public schools was increased by 119.5%, a growing fraction of households chose to exit the public school system. This raises concerns…Evidence clearly indicates an urgent need to revisit the design of SSA,” the Survey says.

Mumbai, July 9
The benchmark Sensex today fell 137.30 points to end at over one-week low of 25,444.81 on concerns highlighted by the Economic Survey and diminishing expectations from the Narendra Modi-led government in its maiden Union Budget tomorrow.

Auto, power, realty, pharma, capital goods and IT shares were at the receiving end. The 50-issue NSE Nifty declined further by 38.20 points, or 0.50 per cent, to over 1 week-low of 7,585 points. — PTI

New Delhi, July 9
The telecom sector has registered a phenomenal growth during the past few years and has become the second largest telephone network in the world, next only to China, the Economic Survey tabled in Parliament said today.

It said the sector attracted over four-fold growth in foreign investments at $1.3 billion during the financial year 2013-14 as against the investment of $304 million in 2012-13 — about 84% lower compared to 2011-12.

FDI in telecom and computer sectors outshone other top key sectors such as financial/non-financial services, construction, hotels and tourism. The top five sectors cumulatively accounted for 45% of total investments in the country last fiscal.

Cumulative FDI inflows in these top five services sectors, however, declined sharply by 37.6% to $6.4 billion. FDI in computer software and hardware sector grew about 2.3 times to $1.12 billion in 2013-14, from $486 million in 2012-13.

“A series of reform measures by the government, innovations in wireless technology and active participation by the private sector played an important role in the growth of the telecom sector in the country,” the Survey said.

The total telephone connections in the country increased to 933.02 million at the end of March 31, 2014 from 898.02 million a year ago. However, the total connections at the end of March 2012 were 951.35 million.

During 2013-14, the government also obtained Rs 61,162 crore from auction of spectrum. The final prices were 27.6% more than the minimum price of telecom radio waves fixed by government at that time.

The government last fiscal had introduced new telecom licensing regime, Unified Licences, under which companies interested in providing mobile or any wireless services are required to buy spectrum separately.

To enhance fixed line broadband connection in the rural areas, the government entrusted state-run BSNL to provide broadband connection with minimum speed of 512 kbps in rural and remote areas under the Rural Wireline Broadband Scheme.

Phenomenal growth India has become the second largest telephone network in the world, next only to China Telecom sector attracted foreign investments of $1.3 bn in 2013-14 as compared to $304 m in 2012-13 Telephone connections in the country increased to 933.02 m as on March 31, 2014 from 898.02 m a year ago

New Delhi, July 9
Stating that infrastructure development was a key to the country’s progress, the Economic Survey for 2013-14 points out that the core sector investment in India has been hit due to design flaws in policies that need to be corrected.

Stating that delays in 110 central infrastructure projects have caused a cost overrun of over Rs 1.57 lakh crore, the government today said the availability of quality infrastructure is the key for the growth of industry and services.

“The first wave of infrastructure investment in India has been grounded in an array of design flaws that now need to be addressed,” the Economic Survey tabled in Parliament said.

It added that the allegations of corruption and intervention by investigating authorities and courts have interrupted many projects and adversely affected firms.

Problems in land acquisition and regulatory hurdles, including delays in green nods has stalled a number of projects.

These problems have come together to result in a large number of stalled projects, a balance sheet crisis for many infrastructure and natural resources firms and difficulties for banks which have lent to them.

Subsequently, the pace of investment in infrastructure and natural resources has declined.

It said the issues that need redressal include “removing procedural bottlenecks, improving governance, and above all maintaining consistency in government infrastructure policies”.

The document expressed concerns that as many as 110 out of 239 Central sector infrastructure projects, each costing Rs 1,000 crore or above, have reported delays, which range up to 26 months in case of steel, coal, power and petroleum projects.

“The total original cost of implementation of these 239 projects was about Rs 7,39,882 crore and their anticipated completion cost is likely to be Rs 8,97,684 crore, implying an overall cost overrun of Rs 1,57,802 crore (21.3% of the original cost,” it said.

In the road sector, construction of national highways by the NHAI, posted a negative growth of 33% during 2013-14 vis-a-vis a growth of 26.5% during 2012-13.

“Infrastructure will continue to be a bottleneck for growth and an obstacle to poverty reduction” unless sectors, particularly transport, energy and communication, put under enormous burden due to recent years rapid economic growth, are significantly improved.

It stressed the need for tackling issues such as problems in land acquisition, delays in regulatory approvals and environment clearances.

The survey said, “Need has been felt to kickstart stalled infrastructure projects by stepping up infrastructure investment and increased private participation will usher in desired funds”.

The government is promoting public-private-partnership (PPP) for bringing private sector efficiencies in creation of economic and social infrastructure assets and for delivery of quality public services.

By the end of March 2014, there were 1,300 projects in the sector with the total project cost of Rs 6,94,040 crore, it said, adding to promote PPP, government is providing viability gap funding, support for project development, capacity building programmes and other tool kits, the survey said.

Delays cause cost overruns Delays in 110 central infrastructure projects have caused a cost overrun of over Rs 1.57 lakh crore Problems in land acquisition and regulatory hurdles, including delays in green nods has stalled a number of projects Issues that need redressal include removing procedural bottlenecks, improving governance and maintaining consistency in govt infrastructure policies

New Delhi, July 9
Stressing the need for the entry of private sector in commercial coal mining, the Economic Survey today said the amendment to the Coal Mines (Nationalisation) Bill, which has been pending in the Rajya Sabha, needs to be expedited.

Since mining involves huge sunk cost, the government should allow only limited number of large domestic companies with proven track record to compete with Coal India Ltd (CIL) and also bring in the latest technology and skills, it said.

Pointing out that re-structuring of the world’s largest producer of coal, CIL was needed to augment production and reduce imports of the dry fuel that cost Rs 95,175 crore in FY’2014, the survey said the implementation of the key infrastructure projects for evacuation and movement of coal was of critical importance for enabling a step-up in coal production.

The TL Shankar Committee on road map for coal sector reforms had recommended the restructuring of CIL during the 12th Plan. “The process needs to be pushed through swiftly,” it said.