In the midst of the noise and analysis of the Union Budget, the economic survey tends to get forgotten. Yet this is the flagship annual economic document of the Ministry of Finance. It contains a lot of economic data for the year as well as solutions to the challenges facing the economy. Despite its importance, the findings and suggestions of the survey tends to be ignored by finance ministers. The reason is simple. Being politicians, they have to keep political considerations in mind along with economic ones.
This year's economic survey however, has strayed off the beaten path. It is more pragmatic and simpler to understand from a common man's point of view. The survey paints a very realistic picture of the economy. All the challenges facing the economy; inflation, infrastructure bottlenecks etc have been mentioned clearly. However, the most interesting takeaway from it is that big bang reforms are not really required for the economy to grow at a good pace. The survey states that a series of well thought out incremental reforms, if done creatively, can be equivalent to a big bang reform.
The other key takeaways are; firming up of India's forex reserves to US$ 1 trillion, significantly boosting investment in infrastructure, rationalising subsidies, accelerating disinvestment of PSUs and setting up a clear and predictable tax policy. These are all indeed welcome recommendations. If acted upon, these alone will go a long way to boost employment, fix the fiscal deficit, improve the productivity in the economy and protect the nation from external shocks.
Of course it won't be an easy task. Inflation has yet to be properly controlled, subsidy rationalisation via direct transfers has not yet taken off, effective infrastructure financing is still stuck due to bank NPAs and policy bottlenecks and the government doesn't have the fiscal room for a lot of big bang infra spending. Thus it remains to be seen how these challenges can be overcome. Despite these difficulties, we believe that after considering the contents of both the budget and the economic survey, the government does seem to be heading in the right direction. We may not be satisfied by the progress made by the government yet but it cannot be denied that the economy is slowly getting back on track.