The economy, as the government sees it, has turned the corner climbing from the deep-end it had fallen into in the last couple of years. According to the Economic Survey, India is set to grow at 8.5% in 2015-16. As the annual report card put it, India has reached a “sweet spot” and the stage is appropriate to give the final push to “wipe every tear from every eye”. On the social sector, the survey seems to favour direct income transfer as a development policy. There should, however, be a caveat: This transmission should come bundled with two other attendant objectives: Asset creation and skill development. There is a redistribution that is happening from urban areas to rural areas. Schemes such as MGNREGA has brought about a shift in income distribution away from the landed class to landless labourers. The total MGNREGA budget over the last 10 years was around Rs 3 lakh crore, but the use of these funds in creating infrastructure and other public assets have, perhaps, left much to be desired.
The latest survey has taken JM Keynes’ advice to heart: It is necessary to distinguish the important from the urgent. The State, if it has to pick up the tab, needs to earn more. Quicker growth adds more funds to the State’s coffer. The survey feels that growth versus distribution is, as it always should have been, a false choice. So, growth is a necessary condition. In normal circumstances, it is safe to assume from the survey forecasts that the economy is going through a purple patch. However, some other macro numbers such as tax collections show, domestic demand remains sluggish and the bottoming out process can be a long one.
The mandate received by the government affords a unique window of political opportunity which should not be foregone. It is often the case that contrarian opinion, if politically important, influences the pace, if not the direction, of reforms. With the economy’s growth showing signs of recovering to levels India was used to before the great crash of 2008, the NDA cannot afford to turn its attention to factors other than those that ought to raise the trend line and aid the revival. There is a perception building up that the government has not been able to deliver on its poll promises. There is a brilliant opportunity for the government to turn this perception around by announcing a flurry of reform initiatives. As the survey rightly points out, job creation for millions will remain a key challenge. There can be hardly better politically correct moves than enhancing people’s job prospects and raising income levels. The settings are just right for finance minister Arun Jaitley to shun gradualism and go for broke.