The Economic Survey for 2013-14, presented to Parliament today, recommended the government to move towards a low and stable inflation regime through fiscal consolidation.
It called for revamping social sector schemes like Mahatma Gandhi National Rural Employment Guarantee Act, National Rural Health Mission and Sarva Siksha Abhiyan and emphasized on reforms in the food market.
Finance Minister Arun Jaitley presented the document in the Lok Sabha while the Minister of State for Finance, Mrs Nirmala Sitharaman tabled it in the Rajya Sabha.
The Economic Survey forecast the growth rate in the Gross Domestic Product (GDP) in the range of 5.4 to 5.9 per cent in the present fiscal, 2014-15. It observed that the GDP growth rate slowed down to below 5 per cent for two consecutive years from 2012 to 2014 due to poor monsoon, uncertainty in the global economy and poor investment climate.
The document said in 2013-14, the industry grew at 0.4 per cent due to poor performance in mining activities and deceleration in the manufacturing output. Consumer price inflation declined to 9.49 per cent in 2013-14 from 10.21 per cent during the previous year.
However, food inflation remained high during 2013-14 due to high inflation in the commodity sub-groups, fruits and vegetables, egg, meat and fish.
The Economic Survey said the country’s balance of payments position has improved in 2013-14 with Current Account Deficit (CAD) coming down to 1.7 per cent of the GDP from 4.7 per cent in the previous year.
During the same period, India’s exports grew by 4.1 per cent from a negative growth rate of 1.8 per cent. Import growth decelerated from 0.3 per cent in 2012-13 to a negative growth of 8.3 per cent in 2013-14, mainly due to fall in the non-oil imports and restrictions on gold imports.
The growth rate of the combined category of trade, hotels, transport, storage and communication decelerated to three per cent while financing, insurance, real estate and services sector registered a robust growth of 12.9 per cent. The Survey said challenges to the external environment continued as the global environment remained uncertain.
The Economic Survey said public finances faced serious challenges in 2013-14. It said the sharp increase in subsidies from 1.4 per cent of GDP in 2007-08 to 2.26 per cent in 2013-14 had contributed for the hike in the fiscal deficit.
In the financial sector, leverage by infrastructure firms and deteriorating asset quality of the banking sector emerged as a major concerns.
Gross Non-Performing Assets of banks increased from 2.36 per cent of total credit advanced in March 2011 to 4.40 per cent in December 2013 with infrastructure, iron and steel, textiles, aviation and mining emerging as the stressed sectors.
The survey stressed the need for addressing long run problems to improve the investment climate. It called for legislative and administrative reforms for building state capacity to allow business to operate in stable environment.
The Survey called for putting public finances on the sustainable path through fiscal correction, a new Fiscal Responsibility and Budget Management (FRBM) Act with teeth, better accounting practices, greater transparency and improved budgetary management.
It argued that improvements on both tax and expenditure are needed to obtain high quality fiscal adjustment. It called for a tax regime that is simple, predictable and stable consisting of a single-rate goods and services tax (GST), fewer exemptions in direct taxes, and a transformation of tax administration.
The Economic Survey opined that restoring economic freedom of farmers and allowing them to be part of a competitive national market is essential for controlling food inflation.
Rationalisation of subsidies on inputs such as fertilizer and food is essential. Government needs to eventually move towards income support for farmers and poor households, so that market forces are able to respond to changes in consumption and technology.
The Survey also discussed the need for revamping some of the social
sector schemes and felt that the outlays for the different schemes
have not often translated fully into outcomes owing to the poor delivery mechanism.
Leveraging modern technology for efficient delivery of programmes, removing the multiple layers of governance, simplifying procedures, and greater participatory role by the beneficiaries can help in creating a better delivery mechanism.
