According to the Economic Survey of India for 2014-15, the Indian economy is likely to grow at between 8.1% and 8.5% next year and “seems poised for propulsion.
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.
Effect of Low Inflation and Oil prices
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.
Big-bang Reforms
The suggested combination of a few bold steps towards 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 standard for evaluating the government’s reform actions”.
Expected Reforms
- 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.
Cash Transfer Through JAM
- The Economic Survey called for a strong push to direct cash transfers through what it called the JAM (JanDhan Aadhar - Mobile) Number Trinity Solution, as a tool to protect the poor.
- The Survey argued that if this could be successfully implemented, 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.
Leakages in the Subsidies
Subsidies ranging from railway passenger fares to water and electricity reach only a small portion of intended beneficiaries and are largely cornered by the relatively well off or leak through the system, the Survey argued with detailed data to support the point.