Economy Feb 27, 2013
The Economic Survey to be tabled in Parliament today is likely to suggest a series of steps to arrest the declining GDP growth, which is estimated to be at the decade-low of 5 percent in the current fiscal.
Prepared by a team of economists, led by Chief Economic Advisor Raghuram Rajan, the Survey is likely to make a strong case for accelerating economic reforms to neutralise domestic and global factors which have stymied growth.
According to CNBC-TV18's Siddharth Zarabi, experts expect Raghuram Rajan's key contribution to be his wide understanding of the way international financial markets work. Given that specialty and the expertise that he has in this regard, survey can perhaps look forward to clear cut pointers and a lot of advice as far as financial intermediation and the markets are concerned. The key thing will be how much of those ideas get reflected in the Budget on that, the track-record so far has not been very good.
The tone of the Economic Survey is likely to be of marked caution and it may reflect some optimism on next year's outlook.
The document is viewed as being important because it prescribes steps for the government to deal with various economic problems, leaving the onus of taking hard decisions on the government.
The major focus of the Survey this year is likely to be on pushing economic growth, which has been projected by the Central Statistical Organisation (CSO) at 5 percent for this fiscal, sharply lower than the original estimate of 7.6 percent (+/- 0.25 percent).
Taking into account persistent contraction of industrial production and exports, the Survey is expected to suggest measures to deal with the issues impacting them. It may, however, welcome the government's recent reform initiatives with regard to partially deregulating diesel price, opening up of FDI in retail and liberalising foreign investment norms for various sectors, including insurance.
On the taxation front, the survey could pitch for early implementation of the Goods and Services Tax (GST) and the Direct Taxes Code (DTC), with a view to expanding tax base and raising tax-GDP ratio.
The issues like surge in gold import and widening Current Account Deficit (CAD) too are likely to figure prominently in the Survey.
The Survey will provide an overview of the inflation situation in the country. While inflation based on Wholesale Price Index declined considerably to 6.62 percent in January, the rate of price rise at the retail level - as measured by the Consumer Price Index - is still in double digit.
Rising subsidy bill will also see a mention in the Survey. While the government had budgeted over Rs 43,000 crore towards oil subsidy for the current fiscal, it had sought Parliament approval for an additional Rs 28,500 crore towards the same account.
High oil and gold imports are impacting the Current Account Deficit, which has widened to 5.4 percent of GDP in the July-September quarter. CAD, the difference between inflow and outflow of foreign currency of a country, was 4.2 percent in 2011-12.
The other major issue would be the fiscal deficit, which is expected to be 5.3 percent of GDP, higher than 5.1 percent estimated in Budget.
Finance Minister P Chidambaram has committed to reduce fiscal deficit to 4.8 percent of GDP in 2013-14, but the task is not going to be easy in view of rising expenditure and subdued growth in revenue collection.
The Survey may also comment on the link between decelerating growth and tight monetary policy followed by the Reserve Bank for long so as to rein in inflation. However, RBI has recently changed its stance by reducing interest rate and unlocking bank funds by lowering Cash Reserve Ratio.
It will also have a separate chapter to impress upon the linkage between global development and the Indian economy, besides focusing on issues concerning human development and climate change.
With PTI inputs
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