ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Lost in Its World

There is a refreshing candour in the Economic Survey 2015-16, but there is also an extreme unrealism.

It has always been interesting to juxtapose the union budget with the annual pre-budget Economic Survey (ES) which is presented a day or two earlier. The budget rarely proposes any of the suggestions of the ES. It is the same but also different this time.

To begin with, there is a degree of honesty in the ES’s discussion in the more important Volume I on the outlook for the Indian economy that has rarely been found in earlier surveys. The ES projects that India’s gross domestic product (GDP) will grow in real terms by 7% to 7.75% in 2016–17, as compared to the growth of 7.6% in 2015–16. However, it makes clear that there are significant “downside risks.” These are mainly the turbulence in the global economy and an uncertainty about an El Nina in 2016 bringing a bounteous monsoon following the drought-laden El Nino of 2015. On the fiscal deficit—an issue which has found its resonance in Budget 2016—the ES presents the case for and against sticking to fiscal consolidation, but one can sense that on balance the chief economic adviser is in favour of a modest relaxation. Budget 2016, however, chose to stick to the promise made last year to peg the deficit at 3.5% of GDP in 2016–17. The ES argues for a review of the entire medium-term framework on fiscal consolidation, and this is exactly what Budget 2016 announced, setting the stage perhaps for an overhaul of the Fiscal Responsibility and Budget Management Act of 2003.

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