Twelve months is a long time in a world where billions of dollars move across continents at the click of a mouse. Last year, the Economic Survey (ES) said India has reached a “sweet spot” and the stage is just about appropriate to give the final push to “wipe every tear from every eye”. Exactly a year later, the annual report card tabled in Parliament on Friday is peppered with some sobering phraseology. For one, India’s GDP will likely expand at 7-7.75% in 2016-17.
The lower end of this band would imply a deceleration from this year’s estimated 7.6% expansion. India’s growth prospects are contingent on the world economy’s recovery. The shaky world conditions were showing up in India’s export numbers. Merchandise exports have shrunk for 14 successive months till January as orders continue to dry out from much of Europe. The ES acknowledges the pitfalls ahead with an unambiguous caveat that the economy should not be assessed in isolation keeping only local variables. By stating this upfront, the government has sought to temper down expectations among all stakeholders.
With two days to go before the budget, the ES has articulated the constraints and goals threadbare. India’s long-term growth potential remains at a robust 8-10%, but fulfilling these require a major policy thrust on three fronts. First, India needs to make the vital move from being just pro-entrepreneurship to being a credible pro-competition investment destination. This may require changes in the legislative and regulatory ecosystem. Second, welfare economics needs to move beyond handouts to monitorable action and service delivery. Investments in health and education are non-negotiable. Third, agriculture continues to remain India’s most unreformed area. Landless labourers and small and marginal farmers need a State-driven helping hand. The newly-introduced crop insurance scheme is a good beginning, but needs to be backed by similar initiatives.
The ES comes at a time when there is a growing a perception that the government has not been able to deliver on what it had promised before the elections two years ago. 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. Despite the volatile external conditions and disappointments over delays in reforms such as a goods and services tax, the sweet spot is still “beckoningly” there. What is needed is a bipartisan political push for one is not quite sure how long the sweet spot will last.