India ready for double digit growth

1. India ready for double-digit
growth

2. Contd.
The Indian economy is likely to grow at between 8.1% and 8.5% next year
and “seems poised for propulsion“, the government's Economic Survey for
2014-15 released on Friday said.The survey said, “India has reached a sweet
spot --rare in the history of nations -in which it could finally be launched on a
double-digit medium-term growth trajectory“. Attributing this to a “political
mandate for reform and a benign external environment“, it added that the
central government should use this opportunity by taking decisive steps in
some areas while pursuing “creative incrementalism“ in others.
Domestically , low inflation makes it possible to bring down interest rates,
while externally , low oil prices help contain current account deficit and fiscal
deficit, both of which contribute towards creating the sweet spot.

3. Contd..
The suggested combination of a few bold steps to wards reforms and
some more gradual ones could over a period add up to “big bang
reforms“, the Survey suggested while making clear that big bang reforms
as conventionally understood “are an unreasonable and infeasible stan
dard for evaluating the government's reform actions“.
Most of the bold steps being mooted were predictable: rationalising
subsidies; reforming labour laws; making sure the ordinances on land
acquisition, coal and insurance get transformed into Acts; rolling out GST;
ensuring fiscal discipline. But the Survey's reference to the political
mandate clearly signalled the desire that unlike in the past this should not
remain a wishlist to be aired annually. The Economic Survey called for a
strong push to direct cash transfers through what it called the JAM (Jan
Dhan-Aadhar-Mobile) Number Trinity Solution, as a tool to protect the
poor. If this could be successfully implemented, it argued, it could lead to
“Nirvana“ for India by allowing prices to be freed up (rather than being
kept artificially low for the poor) and hence act as market signals for
allocating resources efficiently . “This will be the grand bargain in the
political economy of Indian reforms,“ it said.

4. Contd..
Subsidies ranging from railway passenger fares to water and electricity reach
only a small portion of intended benficiaries and are largely cornered by the
relatively well off or leak through the system, the Survey argued with
detailed data to butress the point.
The political awareness exhibited in the assessment of what is feasible in
India's political context -and perhaps in the coinage of an acronym like JAM -
was a characteristic of this year's Survey . Unlike in the past, where the
authors -chief economic advisors to the finance ministry -have shied away
from bringing in explicitly political references, the latest edition repeatedly
refers to what the “new govern ment“ has done and in one place even to the
“previous NDA government“. Such references to political parties or alliances
have rarely been a part of the Survey.

5. Contd..
The political awareness, however, does not mean that
the CEA has necessarily bought into all of NDA's pet
narratives. One area where he departed quite sharply is
in the assessment of what had led to stalled private
projects in the latter part of the UPA's tenure. While the
popular narrative, and the one given currency by the
BJP, has been that policy paralysis and blocked
clearances were the main culprits, here's what the
Survey has to say: “It is clear that private projects are
held up overwhelmingly due to market conditions and
non-regulatory factors whereas government projects
are stalled due to lack of required clearances“.
Anticipating that private investments would continue to
remain sluggish, the Survey urged the government to
boost public spending, particularly in the railways, to
“crowd-in“ investments from the corporate sector.

6. Contd..
The current CEA, Arvind Subramanian, was also not averse to stepping
beyond the strict confines of economics and making suggestions on what
would really be in the realm of geopolitics. He pointed out that while power
might have flowed out of the barrel of the gun in the past, hard and soft
power now come from a “war-chest of foreign exchange reserves“.Citing
China's use of its reserves to become a sort of IMF and World Bank rolled
into one, the Survey posed the question whether India should also target to
build up reserves of $750 billion to $1 trillion against the current roughly
$330 billion although it did caution that building up reserves isn't a costless
exercise.
The tone of the Survey seemed to have convinced the markets that the
finance minister is likely to deliver a bold, pro-reform budget on Saturday ,
but whether that hope is belied, as it has so often been in the past, you'll
know in a few hours time.