Aspirational on growth, realistic on reforms: Samiran Chakraborty

The Economic Survey identifies lower oil prices as the most significant tailwind for the economy, which gives scope to aspire for higher growth and better fiscal management.

The broad objective of switching government spending towards capital expenditure, while maintaining the path of fiscal discipline, is in line with what we have been expecting but the survey keeps a small window open for tweaking the pace of fiscal consolidation. It suggests the urgency of fiscal deficit reduction could be lower now, given the improvement in macro parameters. Although this creates room for higher capital spend, the ability of the public sector to use this money wisely will be tested if the bureaucratic hurdles are not brought down quickly. Without an immediate and significant 'crowding in' of private investment (and aided by a softer monetary policy) the FY16 GDP growth target of 8.1-8.5 per cent projected in the survey could be difficult to achieve. The survey is refreshingly candid in anchoring expectations about big bang reforms in a diverse democracy. It acknowledges that because of political and institutional constraints the government will have limited levers to pull and hopes that gradual steps on diverse issues (we call them "silent" reforms) would evolve into something more meaningful.

In fact, the survey refrains from suggesting too many radical ideas, which might not be feasible to implement and focuses on the combination of technology, financial inclusion and unique identity to dramatically improve the delivery of public services and let market forces allocate resources more efficiently. The survey is high on analytical quality and honest in its vision - it is now up to the Budget to announce the specifics.

Samiran Chakraborty
MD and head, South Asia Macro, Research Global Research at Standard Chartered Bank