The Economic Survey attributed the lower economic growth in FY12 to lower industrial sector growth whilst the farm as well as service sector growth engines were expected to remain resilient in the coming year. As is characteristic of most Government reports, the economic survey suffered from a quant-deficit with concepts being used to replace quantitative forecasts. The only variable that the Economic Survey captured through explicit forecasts was GDP growth. The Survey expects GDP growth rates in India to have bottomed-out in FY12 and expects GDP growth in India to be recorded at 7.6% YoY FY13 and 8.6% in FY14
The Survey admitted that meaningful fiscal slippage in Central Government finances had materialised in FY12 but it expected fiscal consolidation to be implemented over the next few years albeit at a slow pace. It recommended an increase in India’s tax-GDP ratio on the receipts side and limiting the subsidies bill on the expenditure side as ways to tread the path of fiscal consolidation on a sustained basis.
Economic Survey Agrees that Politics is Stalling Reforms Process
The Survey went on to highlight that the focus on ‘corruption’ as a plank in India in FY12 had translated into a decision-making paralysis in the bureaucracy as Government officials were overtly cautious. Furthermore, the Survey attributed the coalition and federal structure of the Indian political system for the slow reform process. The Survey attributed this dynamic to stalled legislations such as allowance of greater FDI in multi-brand retail, amendments to the APMC Act, the implementations of Direct Tax Code (DTC) as well as the Goods and Services Tax (GST).
