Economic Survey indicates the direction of govt thinking

COMMENT: Jairaj Purandare, Leader Markets & Industry, PricewaterhouseCoopers

Business Standard / New Delhi July 03, 2009, 0:52 IST

The Economic Survey 2008-09 presented to Parliament provides a broad roadmap which the government needs to implement in the short and medium term to enable the country to achieve the growth targets and address fiscal imbalances.

The survey touches upon several key measures.

Further reforms in the petroleum, telecom, financial and energy sectors, with emphasis on rationalisation/reduction of subsidies, decontrol of existing products, introduction of new financial avenues and derivative products for increased monetary expansion and inclusion has been mentioned in the survey.

Reforming the tax sector, with the rationalisation of taxes, introduction of the new income tax code and implementation of the GST is another area of focus.

The survey also highlights improvement of the investment environment by permitting FDI in multi format

retailing and increased FDI of up to 49 per cent in nuclear energy, insurance (100 per cent in health, weather insurance), defence manufacturing (with 100 per cent on a case by case basis in high technology, strategic defence goods).

Revitalising the disinvestment programme with a target of collection up to Rs 25,000 crore per year from such disinvestment, including corporatisation and disinvestment of select departmental enterprises is another measure outlined.

Lastly, the survey mentions institutional reforms in terms of setting up a regulatory body in the transport sector covering highways, railways, ports and airports, an environmental regulator, urban governance, land policies, legal dispensation, internal security, higher education and healthcare.

While these measures seem conducive to provide the necessary impetus to the respective sectors, they would require increased involvement and ground work to be carried out by the government at the central and state levels before they have any meaningful effect.

In the meantime, the government should continue with its fiscal and monetary policies to address the economic slowdown. Further, the forthcoming Budget could provide the necessary direction which the government would take, at least in respect of the tax reforms suggested in the economic survey.