Cautious optimism
The central theme of Economic Survey 2007-08 is maintaining the strong economic growth momentum of the recent period. With the annual GDP growth exceeding 8 per cent since 2003-04, the economy has moved decisively to a higher trajectory. The official forecast of 8.7 per cent for 2007-08 accords with this trend. But the figure suggests a slight deceleration, considering that the first six months of the year recorded a growth of 9 per cent or more. For 2008-09, most official forecasts have pegged the rate at 8.5 per cent or less. The key task is to regain the upward push so that the economy averages a 9 per cent or even higher growth towards the end of the 11th Plan. There are both positive and negative factors that would shape the near-term outlook. Macroeconomic fundamentals continue to inspire confidence. A sharp acceleration in the domestic investment and savings rates has sustained the high growth. Buoyant tax revenues have helped in fiscal consolidation so far. The budget will show if the government's finances are on track to meet the goals set under the Fiscal Responsibility and Budget Management Act. Inflation however remains a major worry. Over the past year global factors, notably the high prices of oil, food and other commodities as also the turmoil in financial markets have clouded the external environment. Appreciation of the rupee and a slowdown in specific segments of industry as well as in infrastructure are some of the other major areas of concern. For sustaining economic growth at high levels, policy makers are up against several challenges. Additional reforms are obviously needed. Capital inflows, especially those relating to direct investment, are expected to continue in the medium-term. Combating inflation has become more complex in the context of recent structural changes in the economy and its increasing globalisation. Among the important factors to be reckoned with are the high tariffs on agricultural products, the large share of food in the consumption basket, and the slow modernisation of agriculture and allied activities. Inadequate availability of infrastructure continues to be a major constraint on the supply side. Highlighting the need to improve social sector and human development outcomes at the level of the States, the Survey lays stress on improved delivery mechanisms for the success of programmes such as the NREGP and Bharat Nirman. In a departure from the past, Survey 2007-08 has sought to provide a more rigorous analysis and a conceptual framework, and has added a new chapter that covers subjects of topical interest. That along with the proposal to release background papers will help in disseminating timely economic information to a larger audience.
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