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SAFE SURVEY

The Economic Survey’s message is real gross domestic product growth of 6.1 per cent in 1999-2000, 4.4 per cent in 2000-01, 5.6 per cent in 2001-02 and 4.4 per cent in 2002-03, subject to quibbling over advance, quick, provisional and final figures. Inflation is low, food and foreign exchange reserves are comfortable. In January 2003, foreign exchange reserves increased to $ 73.6 billion, and this was not because of arbitrage on interest rate differentials, but due to current account inflows, non-debt creating capital inflows and valuation gains. For the first time in 23 years, there was a current account surplus in 2001-02. Structural reforms have taken place in the capital market, privatization is happening, infrastructure (the national highway development programme, telecommunications) has improved and so have employment and poverty indicators. India broke away from the Hindu rate of growth of 3.5 per cent in the Eighties, with the decadal rate of real GDP growth improving to 5.65 per cent. And broke away yet again in the Nineties, with an average growth of 7.5 per cent between 1994-95 and 1996-97. That indeed is the point. The average gross national product growth during the eighth plan (1992-97) was 6.8 per cent and it dropped to 5.6 per cent during the ninth (1997-2002). Given this growth deceleration to around 5.5 per cent (hopefully 4.4 per cent is an aberration), there is no way the tenth plan (2002-07) target of 8 per cent is possible. The Economic Survey describes 8 per cent as “feasible”, since other countries did it. True. But India did it till 1996-97, not thereafter.

What explains deceleration since 1997 and what can be done to reverse it' Without answering this question, the Survey does not get very far, and this is the present survey’s greatest weakness. It prefers to wish away deceleration, which is why a graph depicting the economy’s acceleration in the Nineties ends with 1996-97 and rather paradoxically, explanations are given (technology, competition) for acceleration between 1992 and 1997. The deceleration is cyclical, thanks to external (lacklustre global recovery, Iraq) or internal (drought) circumstances. If it is not structural, solutions do not have to be suggested. Growth will automatically recover, once adverse circumstances are removed and Iraq is sorted out. The Survey provides a lot of data, and in the introductory chapter, there is always a segment titled “issues and priorities”.

Since 1991, this segment has usually stuck its neck out on necessary reforms, irrespective of what the imminent budget brings. The present survey is remarkably risk-averse, with this segment mentioning infrastructure, regulatory structures and tax reform. To take but one example, no position is taken on the two reports of the Kelkar task forces, except for procedural simplification. The only enterprise displayed is in advocating reforms in agriculture, thankfully a state subject. It is this aversion to risk that makes this year’s survey extremely boring and pedestrian. It says nothing that was not already known. Election-year budgets have been heard of. An election-year Economic Survey is certainly new.

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