Put economy back on 7 to 8 per cent growth path: Economic Survey
George Iype in New Delhi
The Economic Survey for 1997-98 has called for putting the country's economy back on a higher growth path of 7 to 8 per cent of the gross domestic product by stepping up foreign investment and exports and reviving the primary capital market.
The Survey, tabled in Parliament on Thursday, paints a dismal picture of the GDP growth which decelerated to 5 per cent in 1997-98 from 7.5 per cent in 1996-97. It attributes the GDP drop mainly to a sharp fall in the growth rates in agriculture as well as industry.
The production of foodgrains during 1997-98 is expected to be only 194.1 million tonnes compared with the 199.3 million tonnes during 1996-97.
Likewise, the industrial production has been affected severely in 1997-97 as the growth rate is a mere 4.2 per cent compared to 7.1 per cent growth in the previous year and 12.1 per cent in 1995-96.
While the average inflation rate in 1997-98 was less than 5 per cent compared to 6.3 per cent in 1996-97, the service sector posted a robust growth of 8.9 per cent in 1997-98.
The Survey says the process of fiscal consolidation received a setback during 1997-98 with the central government's fiscal deficit reaching 6.1 per cent of the GDP as against the Budget target of 4.5 per cent.
The deterioration in the fiscal deficit was due primarily to a tax revenue shortfall of Rs 142.36 billion and a shortfall of Rs 38.94 billion in disinvestment receipts.
According to the Survey, India's external debt increased marginally by $ 0.7 billion from US $ 92.2 billion at the end of 1996-97 to US $ 92.9 billion at the end of September 1997. Though the exchange rate of the rupee displayed reasonable stability in the past year, the currency experienced a mild contagion effect of the
southeast Asia turmoil.
It says there has been a handsome surplus of foreign investment and a surge in the net inflow of non-resident Indian deposits to the country. During 1997-98, India received a total foreign investment amounting to $ 4.8 billion.
In the same period, the foreign direct investment amounted to $ 3.2 billion, an increase of 18.6 per cent over
the corresponding period in 1996-97.
The Survey says the sharp slowdown in the GDP, the poor export growth, the rising fiscal deficit and infrastructure are the government's main concerns.
Therefore, the Survey calls for imperative and fresh economic initiatives to do away with the "inspector raj" and to necessitate raising of savings rate to about 30 per cent of the GDP through a reduction of government dissavings. It also seeks an improvement in the infrastructure areas like energy, transport and communications.
The annual economic document also warns that high levels of government expenditure and fiscal deficits can also put pressure on the current account deficit. The Survey calls upon the states to share the responsibility of fiscal consolidation and prudence in a federal polity.
According to the Survey, the banking system has to be reformed so that interest rates come down due to competitive pressures. It also calls for greater efficiency and lower implicit taxation of the banking sector. Access of companies to debt markets also needs to be improved by deepening and widening these markets.
It says the pace of industrial growth and investment has slackened markedly since the middle of 1996-97 for a variety of reasons. The Survey, therefore, suggests a broad array of measures to boost export growth, to encourage higher private and public investment in core infrastructure and industrial sectors and fiscal and
monetary policies aimed at moderating real rates of interest and ensuring adequate availability of productive
capital to industry.
While there has been substantial growth with the delicencing of industry, the "controls mind-set"
remains influential and the "inspector raj" continues to flourish in the country, says the document.
"As we approach the beginning of the 21th century, the shortcomings in our social sectors such as education,
health, water supply, sanitation and housing in relation to other Asian countries becomes increasingly stark
and unacceptable," says the Survey.
Hence, it recommends that the ongoing economic reform process should be re-appraised and revitalised to give
the entire national development effort a more humane face. While the eradication of poverty and unemployment
should be abiding goal of our development policies, programmes should be initiated to provide effective safety
net for millions in rural areas.
The Survey states that the incidence of poverty has continued to decline during the 1990s. The poverty ratio
for rural and urban areas in the country has considerably declined from 56.4 per cent in 1973-74 to 37.3 per cent in