Eco Survey high on ambition, is past scepticism in order?

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Is this year's Economic Survey irrationally exuberant? Not in its diagnosis of the state of the economy and the prospects of high growth - about which it is guardedly optimistic - but in its ambition for fiscal, tax and investment reforms.

The Survey not only calls for disinvestment, it sets a target of at least Rs 25,000 crore a year, and even spells out the roadmap. Begin by selling 5-10 per cent in profitable non-Navratnas, it says. Convert port trusts into companies and list them by off loading 49 percent equity. List all wholly-owned state enterprises (61) on the stock markets, by selling 10 per cent equity and auction loss-making government firms.

It is equally ambitious on tax reforms. Abolish Fringe Benefit Tax, remove securities transaction tax, make dividends once again taxable in the hands of the receiver, convert all specific duties on imported textiles (say Rs 100 on an imported shirt) into value-based ones....

While admitting that there was a slow-down in reforms in this government's previous stint in office, it states the unfinished agenda: (as) pass the pension regulatory bill (b) raise foreign direct investment in insurance to 49 per cent; allow 100 per cent FDI in politically-beneficial health and weather insurance (c) permit FDI in retailing, starting with groceries so that farmers can gain from farm-to-fork linkages, while addressing the concerns of mom-and-pop stores (d) lift prices controls on all drugs, except essentials, provided there is enough price competition (d) allow free-pricing of sugar and fertiliser; give subsidies directly to farmers and not to producers (e) allow private tourist trains (f) separate telecom licenses from radio waves or spectrum and auction the spectrum (g) enact a new bankruptcy law (h) implement the goods and services tax from next April.

This is a summary of all the reforms that have been recommended by policymakers at various times in the past 15 years. Should it be seen as an agenda for action?

Economic surveys in the past have come with a statutory warning: Be sceptical. The Survey of 2005 said FDI should be allowed in retail trade and increased in coal mining, insurance and real estate. Except for real estate, the advice has not become policy, so far. So it would not be wrong to view the Survey as spelling out what is desirable while the Budget is about the art of the possible.

The survey is supposed to be a clinical analysis. But for that reason, it cannot be politically naive. The Economic Adviser is appointed by the government and reflects its attitude to matters economic. I would see the Survey as a weathercock - it shows which way the wind is blowing.

In this government's previous term, Prime Minister Manmohan Singh's reformist instincts were tamped down by reasons that I do not need to elaborate. The election victory has made him Presidential. There is a sense of purpose. Most ministers have announced 100-day agendas. The government has not dithered on the hike in petrol and diesel prices. The Survey, therefore, should be seen as having the imprimatur of the Prime Minister, as an elaboration of the government's agenda spelt out in the President's address.

As for the economy, the Survey is cautionary. While the economy was resilient enough to weather the weathered the downturn, it wants a return to high growth with moderate prices and financial stability. It warns that credit expansion could stoke the next cycle of high inflation. Farm output is expected to be normal despite below-normal rains predicted, but food prices need watching.

Imports are no consolation, the country must grow its own food by raising productivity. The Survey wants an early restoration of the fiscal balance with the country moving to zero fiscal deficit (not 3 percent as set in the FRBM Act) over the economic cycle (and not, as now, in five years), with years of fiscal surplus making up for years of fiscal deficit.

The Survey certainly aspires to the moon. The Finance Minister may land on the tree top.