The Finance Ministry’s India Economic Survey – the pre budget analysis clearly mentions how the India’s economy could be pulled out of the slowdown and accelerate by nearly 6% this fiscal year. “The economy can look forward to better growth prospects in 2014-15 and beyond,” said the survey on the eve of the budget.
In short the survey shows the “Road to Revival and Return to High Growth”
- GROWTH- The government economic survey expects a growth of 5.4% – 5.9% of Indian Economy in the current fiscal year. The slowdown of the growth in the last two years list the factors like poor monsoon, external environment, oil prices and the poor investment climate. The survey further analysed the measures by the government to revive the confidence of the investors and to improve the governance that could increase the growth to 7-8% in succeeding years. The growth could only be revived after FY-16. The GDP of 2010-11 showcased a high growth rate that slowed down to a decade low of 4.5% in 2012-13 that picked up marginally to 4.7% in 2013-14.
- INFLATION- The survey mentioned that monetary policy is essential for controlling inflation in long run. Though the inflation has been eased but it is still above comfort level. Inflation limits the scope of RBI to cut rates and the moderations in inflation will further ease the monetary space. However the WPI inflation rose to a five month high of 6.01% in May from 5.20% in previous month mainly driven by higher prices of food items. CPI inflation n also shows the signs of moderation.
- SUBSIDY- The economic survey for the year 2013-2014 has emphasised the need to reform subsidies and cash transfer. The pre-budget survey has suggested payment of subsidy in cash for those below poverty line. The survey further pointed that all the money put into subsidy scheme does not reaches the poor and there is a rise in fiscal deficit after 2008-09. The survey further unveils a new and stricter schedule to reduce fiscal deficit.
- TAXATION- Government needs to move towards simple tax regime, fewer tax exemptions and single rate of Good and service tax (GST). GST is to play vital role in Indirect Tax reform. The Direct Tax Code required to replace existing income tax laws that will reduce the compliance costs and boost tax collection.
- FOREX MARKET- The major rupee fall in 2013 due to speculations and frictional forces, the economic survey clearly mentions that the currency has stabilized reflecting overall sense of confidence and optimism to improve investment flows. There is a need to build the confidence and optimism for investors inflows to sustain the external position globally. The rupee reached a record of 68.75 to a dollar the measure taken by RBI and government helped the rupee to rebound the currency. The exchange rate in 2014-15 reflects the same pattern as in the latter half of 2013-14 with a surge in FII flows impacting the foreign exchange and equity markets favourably the survey said. As at the end of May 2014, the forex reserves stood at $312.2 billion, up from $304 billion in end March.
- CURRENT ACCOUNT DEFICIT- The survey 2014 further denotes that the external debt remains with manageable limits. 2014-2015 CAD may be contained to around $45 billion or to 2.1% of GDP.
- BALANCE OF PAYMENTS-Improvement in balance of payments position during late 2013-14 was swift thanks to import restrictions and economic slowdown. Need to adjust to advanced economies’ eventual exit from accommodative monetary policy stance.
The Economic Survey shows the gravity of the economic situation that needs correction.
The priority of the new government, the survey said, should be to revive business sentiments, that could be at the heart of restarting the investment cycle.