As usual the Economic Survey a wish list and prescription of finance ministry economists including freeing up FDI in retail, streamlining land acquisition, introducing goods and services tax and so on. A first look reveals that two things stand out this year.
One, the Survey predicts GDP growth will come in at 9% in financial year 2011-12. This, despite, increasing crude oil prices, rising inflation, expected hike in interest rates, unexciting company profit growth rates in the three months ended December.
According to the survey, this growth will come from the momentum in savings and investment rates and the demographic dividend which is yet to peak. It also points to the increasing investment in infrastructure as something that will boost sustainable growth. While that may be true in the long-term, things don’t look so hot now. As Mint’s Manas Chakravarty pointed out earlier this month.
Investment demand is in for a substantial slowdown in the current half of the year. For instance, year-on-year growth in gross fixed capital formation (GFCF) has been estimated to slow from 14.9% in the first half of the year to 2.6% in the second half.
In other words, the Survey sets the stage for a lower fiscal deficit next year. Higher growth means more buoyancy in tax collections and hey presto, the fisc can be reduced without too much sacrifice in expenses.
Second, the Survey has taken a moral tone, perhaps for the first time. It has tinged this advice though as something that is necessary for an economy to function.
Economic life is full of little promises—I will supply you X today, and you will pay me Y tomorrow. For these, it is impossible each time to bring in the policeman and the judge to ensure enforcement. The best enforcer of these little contracts is our word of honour and the ‘culture of honesty’ and trustworthiness.
For India to develop faster and do better as an economy, it is therefore important to foster the culture of honesty and trustworthiness. .. So once we recognize that honesty, integrity, and trustworthiness are not just good moral qualities in themselves but qualities which, when imbibed by a society, lead to economic progress and human development, people will have a tendency to acquire these qualities; and that should help build a more tolerant and progressive society.