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Economic Survey outlines plan for eight pc growth

          New Delhi: Giving some hope to the Indian public, Union Finance Minister P Chidambaram on Wednesday outlined the United Progressive Alliance's roadmap for achieving a seven to eight per cent economic growth on a sustained basis. The government's Economic Survey today indicated major initiatives in the Union Budget to overhaul the tax system, slash deficit, contain prices and boost agriculture and industry. Sounding alarm bells on the mounting fiscal deficits of both the Centre and states at 10 per cent of GDP, the Economic Survey (2003-04) said there is a clear need to reduce the number of tax notifications, simplify procedures and move towards a paper-less and transparent administration anchored on trust.

          Apart from fiscal consolidation and sustaining growth momentum, it listed other major challenges as: * Boosting farm growth * Expanding industry by 10 per cent * Keeping inflation rate down to about five per cent Warning that hardening global prices of oil and non-oil commodities could affect monetary conditions, the document warned that the possibility of interest rates moving up could not be ruled out.

           The Survey identified five constraints in achieving 10 per cent growth in the industrial sector: * Reservation for small scale industries * High customs tariffs * Rigidity in labour laws * Reaping economies of scale * Friction in creation and closure of firms * Distortions in indirect tax structure

          The Survey further said the customs duties should be gradually reduced to align them with that of ASEAN countries. The peak rates of customs duties were reduced to 20 per cent in the interim budget earlier. It also called for adherence to the deadline of April 1, 2005 for transiting to a state-level Value Added Tax (VAT) system. It pointed out that this was essential as the current regime of domestic trade taxes at the state level was characterised by distortions and inefficiencies, arising from cascading and multiple rates. Implementation of VAT and recommendations of the 12th Finance Commission would be critical determinants of fiscal improvement at the state level, it said. To achieve the specified milestones in fiscal adjustment, there was a need for sustaining the reforms in tax and expenditure administration. "Any misguided skepticism about the resolve behind the declared goals of fiscal consolidation should be scotched by bold actions," it said adding that the reward of consolidation will be creation of more fiscal space for social and physical infrastructure and macro-economic stability. Though economic growth has improved from 2.9 per cent in the 70s' to 5.8 per cent in the 90s', the Survey said 8 per cent growth would require an acceleration in savings and investment rate to 32.3 per cent and 24.4 per cent respectively in 2006-07.

           Elaborating on fiscal consolidation, it called for establishing a rigorous penal and enforcement mechanism that takes care of those who violate trust imposed as is the practice in countries with low rates, simple tax laws and procedures. Sustainable growth hinges on availability of efficient infrastructure, it said, adding that a strong enabling environment had to be created for more private investment in the sector. Noting that surging global oil prices were unlikely to stifle the growth recovery, the Survey, however, cautioned if it persisted, it would not only threaten to dampen some of the momentum of the process but also exert upward pressure on inflation. Though foodgrains stocks were comfortable, the full potential of agriculture as a profitable activity must be realised at the earliest to give a fillip to overall growth of the economy. Some of the measures for boosting agricultural growth required the development of a medium-term framework, it said, calling for better access to timely institutional credit for more farmers was of utmost importance. While acceleration of agriculture growth to 4-4.5 per cent was crucial, it was important that agro industries are developed to absorb excess farm labour.

          Stressing that annual industrial growth has been in a disappointing single digit since 1995-96, the Survey said one of the challenges is devising strategies for sustained growth of 10 per cent. The experience suggests that with appropriate scale, investment and technology, rapid industrial growth is indeed possible. On the termination of quota system in textiles by January one, 2005, the Survey said it offered great potential for the growth of the industry, which is largest in terms of employment. Voicing concern over a slowdown in FDI, it said suitable liberalisation of both the FDI and FII regimes, including procedural issues, need to be considered for enhancing foreign investment flows as considerable buoyancy of China's industrial growth has been due to large FDI flows. The strong interest displayed by FIIs in the Indian market in 2003-04 is encouraging and is likely to continue if there are no exogenous factors. There is likely to be a large and growing demand for Indian securities by FIIs. This needs to be harnessed. Among the other factors that could help in boosting industry are removal of the remaining items from the list reserved for small- scale industry, adequate supply of credit services, technology assistance and infrastructure and low transaction costs.

           Asserting that the fiscal situation of state governments has been a cause of concern, it said the main factors that had contributed to fiscal deterioration were: * Relatively higher level of expenditure on salaries * Unfunded pensions * Mounting interest payments * Improperly targeted subsidies * Deterioration in the tax-GDP ratio

           On the capital markets, the Survey said India's equity market was now being increasingly recognised as a success story on the world scale. The focus of development in the commodity futures markets has shifted to the three multi-commodity exchanges. These efforts will need to be followed through with improvements in clearing and settlement, and strengthening the regulatory framework. On the reform of power sector and proper development of public utilities, the Survey underlined the need for enforcing user charges and proper regulation to inject competition in the infrastructure sector.

Congress will monitor implementation of UPA agenda (Go To Top)

         New Delhi: The Congress has said that it would closely monitor the implementation of the promises made in the ruling United Progressive Alliance (UPA)'s agenda of governance. The Congress-led UPA had come out with a common minimum programme, shortly after coming to power. After the first general body meeting of the Congress Parliamentary Party (CPP), party spokesman Anand Sharma said that the Congress president Sonia Gandhi also wanted her party members to regularly attend parliament.

          He said: "Sonia talked about the priorities of the Centre. She stressed on the need of implementing the promises, the UPA government had given to the common people, especially the women, the poor and the weaker sections of the society. She said the government, as a whole, will be closely monitoring the implementation of the commitments made in the Common Minimum Programme." The meeting, which was attended by Prime Minister Dr Manmohan Singh and other Congress ministers, assumed significance even as it came a day ahead of the keenly awaited budget for the fiscal year to March 2005 on Thursday.