Annual survey points at worst growth slowdown in 30 years
Talks of need to recast subsidy regime & improve business climate
IT'S FAR worse than it looks.
Given the acceleration of inflation from 2006 to 2014, the survey emphasised the need for tough measures to shore up public finances and reduce inflation in order to nurse the economy back to a 5.5-5.9 per cent rate of growth at best during the current fiscal. It warned, however, that a weak monsoon could play spoilsport and fuel food inflation.
A significant suggestion of the survey was the need to restructure
The minister said that the fiscal deficit for the current year would be 4.5 per cent of GDP which needs to go down further in the next two years. This is much higher than the per cent estimate in the interim budget prepared by former finance minister
Chidambaram's sleight-of-hand exercise provided a mere `63,427 crore as subsidy for petroleum products in his interim budget budget for 2014-15. That number far smaller of the actual subsidy `96,880 crore that the government had to eventually shell out in 2012-13 as the subsidy on kerosene, diesel and LPG. It is expected to go up to `1.3 lakh crore during the current fiscal.
Jaitley has inherited a fiscal mess.
Similarly, Chidambaram provided only `67,970 crore in the interim budget for meeting the fertiliser subsidy bill of the government which is also likely to go up.
The economic survey has recommended tackling food and fertiliser subsidies to lower spending while broadening the tax base.
The measures suggested in the economic survey to revive the economy include massive investment in infrastructure, marketlinked reforms, boost to manufacturing, tax reforms and structural changes in various sectors to bring the economy back on track (see accompanying reports). Moderation in inflation would help ease the monetary policy stance and revive the confidence of investors.
With the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospect in 2014 and beyond, it said.
Hence it is important to create environment conducive for firms to invest, the survey said (See accompanying report).
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