The Economic Survey hopes the government moves with more earnestness to remove the bottlenecks that have stalled so many projects
The Economic Survey 2012-13 is yet another wake-up call for the Manmohan Singh government to take the problems that are hampering investment and throttling growth more seriously. It would be interesting to see how many of the suggestions made by the survey to spur growth and investment and increase employment are reflected in the Union Budget.
The survey has pointed out the need to widen the tax base, prioritise expenditure, ensure improved supply as the way to curb food inflation, remove bottlenecks impeding investments, target subsidies to prevent leakages, stress on human resources and curb gold imports by giving people, particularly those in rural areas, financial instruments in which to invest, like inflation-indexed bonds etc. The survey, however, recognises that the returns from gold were 23.7 per cent on an average annually between 2007 and 2012 compared to the 8.2 per cent return on the Nifty and 8.2 per cent on savings deposits. This is a conundrum the government has to resolve apart from bringing down inflation, which is the main reason for people using gold as a hedging instrument.
The survey expresses concern over the sharp slowdown in corporate investment, a source of future supply and growth, and calls for structural reforms to encourage productive investment and its financing.
It expresses concern over the widening current account deficit and the lower-than-targeted growth in tax and non-tax revenue.
While the problems highlighted by the survey are not unknown, the survey’s suggestions of how to handle them have a sense of déja vu. It hopes that the government moves with more earnestness to reduce expenditure to anchor inflation and remove the bottlenecks that have stalled projects primarily in six sectors, which account for 80 per cent of the stalled projects — including power, roads, steel and mining.
A notable suggestion is that cash-rich PSUs should start investing and the government should get the Delhi-Mumbai Industrial Corridor off the ground to improve the investment climate. Interestingly, the government, under the public-private partnership mode, had initiated more than 900 projects, valued at `543,045 crore, in the infrastructure sector till December 2012. It also released `20,145.2 crore under the JNNURM mission as additional Central assistance till December 2012.
The survey, which painted a cautious picture of the year gone by, is more optimistic about the year ahead, though with some riders. It sees GDP growth at 6.1-6.7 per cent in FY14 and lower inflation if supply-side constraints are eased. This will also give space to the RBI to lower interest rates. Revival of growth, it says, would help banks contain their burgeoning non-performing assets.
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