Time for ‘Big Bang’ reforms to accelerate growth
New Delhi: Pitching for ‘Big Bang’ reforms, the pre-budget Economic Survey today called for improving business environment by making regulation and taxes less onerous to help push growth to 8.1-8.5 per cent next fiscal, and to double digits in the coming years.
“India has reached a sweet spot and there is scope for Big Bang reforms now,” said the Survey on the eve of the new government’s first full-year Budget, to be presented by Finance Minister Arun Jaitley.
A clear political mandate for reforms and a benign external environment, it said, “is now expected to propel India to double digit growth trajectory”. The BJP-led NDA government came to power in May last year wining a clear mandate.
Other areas highlighted by the Survey include reforming labour laws, building infrastructure and enabling connectivity to reduce cost of doing business in the country.
“In the short run, growth will receive a boost from lower oil prices, from likely monetary policy easing facilitated by lower inflation and lower inflationary expectations, and forecast of a normal monsoon,” the Survey said.
It also indicated that the growth during 2014-15 may touch 8 per cent on better farm output. The CSO had projected growth at 7.4 per cent for current fiscal.
“Several reforms have been undertaken and more are on the anvil. The introduction of the GST and expanding direct benefit transfers can be game-changers,” it added.
The major reforms undertaken by the government include deregulation of diesel prices, direct transfer of cooking gas subsidy, hiking FDI cap in defence and insurance, Ordinance on Coal.
Stating that macro economic situation in the country has improved significantly in the current year, the Survey raised concerns over growth pattern in exports, construction and mining activities.
Investment activity, which is slowly picking up, needs to be grounded on a stronger footing, it said.
India must adhere to the medium term fiscal deficit target of 3 per cent of the GDP, it said, adding “this will provide fiscal space to insure against future shocks and also to move closer to the fiscal performance of its emerging peers.
Following are the highlights of Economic Survey 2014-15 presented by Finance Minister Arun Jaitley in Parliament today:
* GDP growth seen at 8.1-8.5 per cent in 2015-16
* Double digit growth trajectory; 8-10 pc GDP in coming yrs
* Inflation shows declining trend during April-December
* CAD to decline to about 1 pc in 2015-16
* To adhere to fiscal deficit target of 4.1 pc of GDP; to aim for 3 pc
* Committed to fiscal consolidation; to enhance revenue generation
* More reforms on anvil; GST, expanding direct benefit transfers to be game-changers.
* Foodgrains production for 2014-15 estimated at 257.07 million tonnes; will exceed last 5-yr average by 8.5 MT
* NITI Aayog, 14th Fin Comm to enhance fiscal federalism
* External Sector returning to strength, resilience
* Need balance between ‘Make in India’ and ‘Skilling India’
* Services sector negotiations at WTO crucial for India in removing many market access barriers
* Revitalise PPP model to revive investment
* Manufacturing and services equally important for growth
* Consumer inflation in 2015-16 to be between 5-5.5 pc
* Lower inflation opens up space for more monetary easing
* There is scope for big bang reforms
* Labour, capital, land, market reform and skills to be engines of growth
* JAM Trinity – Jan Dhan Yojana, Aadhaar, Mobile – to help transfer of funds to poor without leakage
* Shield domestic industry to promote ‘Make In India’
* Borrowings to fund investment, not for meeting expenses
* Food subsidy bill in Apr-Jan up 20 pc to Rs 1.08 lakh cr
* Reform Railway’s structure, commercial practices, overhaul of technology
* Public investment key growth engine in short-run for Railways, but not a substitute for private investment
* More disinvestments on the anvil in current fiscal
* Under-recoveries on petroleum products to come down to Rs74,664 crore in 2014-15, from Rs 1.39 lakh crore in FY14
* 4Ds – Deregulation, Differentiation, Diversification, Disinter (better bankruptcy laws) – to push financial sector growth
* Implementation of GST to boost GDP, exports
* Suggests medium to long term fiscal policy to target deficit, expenditure
* Global commodity prices to remain weak in 2015
* Ecommerce sector to witness 50 pc growth in 5 yrs.