Familiar advice

WITH THE PRESIDENT in his address to Parliament, the Prime Minister and the Union Finance Minister all talking in recent weeks about the need to take tough decisions on the economy, it was obvious that the Economic Survey of 1999-2000 would also focus on the same issues. It is no surprise then that the Survey discusses the hard decisions that have to be taken to lower the fiscal deficit, downsize Government, reduce subsidies, raise user charges, disinvest in power generation and more. It is also not the first time that the annual Survey has identified these areas for action. However, as last week's postponement of the decision to reduce the subsidies on some petroleum products has shown, it is very easy to talk about hard decisions but very difficult to implement them. The issue is not merely one of the difficulties posed by coalition Governments, it is more a question of being able to successfully take decisions by deliberation, consultation and consensus in a fractious democracy. It may not be the job of the Economic Survey to address the interface between the political process and economic decision-making. But a repeated discussion of the same issues and in the same vein is beginning to reduce the value of this annual document. The proposals in the Union Budget for 2000-2001 that will be presented today and the success of the Government in having the budget passed by Parliament will show how far the advice of the Survey has been heeded by the polity.

What is unusual though is that what is supposed to be an annual review of the economy side-steps in large measure the deceleration in growth during the current financial year. It instead prefers to talk about an industrial recovery and a cyclical fall in agricultural production in 1999-2000. However, as the Survey itself notes, the economic revival of 1998-99 was led by faster consumption by both the Government and household sectors while there have been disturbing trends in investment in 1999-2000. It points out that the growth of capital goods production has begun to decelerate, imports of these products have fallen off sharply, the increase in sanctions from financial institutions has slowed and foreign direct investment has declined for the second year in succession. All these do not augur well for a broad-based industrial recovery. And even as the annual review notes with satisfaction the rapid growth of the information technology sector, it is correct in suggesting that the knowledge-based industries themselves cannot sustain an industrial recovery. On agriculture, the Survey makes the worrying observation that food production grew during the Nineties at exactly the same rate as the population. How far the call for effective public programmes in irrigation, agricultural research and credit will be heeded by the Central and State Governments is another matter.

To be fair to the Economic Survey it does raise a few new issues. One of the more notable ones is the burden of an outdated and slow legal process that has been placed on economic growth. As the report itself admits, the Government is itself a large part of the problem since it is plaintiff, defendant, appellant or respondent to appeals in 60 per cent of the suits that are filed, with most of the cases linked to economic disputes. Finally and at last, there is one Government document that is forced to at least indirectly mention that economic growth over the past decade appears to have had a limited impact on poverty. With the rest of the Survey making a strong case for more reforms it naturally chooses its words very carefully and leaves the issue by merely stating, ``This is a cause for concern''. However, this may well mark the beginning of bringing the issue back to the centre of decision-making.

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