Economic Survey advocates reforms to unleash economic dynamism and social justice
India needs an evolution in the underlying economic vision across the political spectrum and further reforms are not just a matter of overcoming vested interests that obstruct them. This was stated in the Economic Survey 2016-17 presented in the Parliament today by the Union Finance Minister Shri Arun Jaitley.
The Survey lists the some of the challenges that might impede India’s progress. These challenges are classified by the Survey as follows: ambivalence about property rights and the private sector, deficiencies in State capacity, especially in delivering essential services and inefficient redistribution.
The Survey highlights difficulties in privatizing public enterprises, even for firms where economists have made strong arguments that they belong in the private sector. In this context, the Survey points towards the need to further privatize the Civil Aviation, Banking and Fertilizer sectors.
The Survey points out that the capacity of the State in delivering essential services such as health and education is weak due to low capacity, with high levels of corruption, clientelism, rules and red tape. At the level of the states, competitive populism is more in evidence than competitive service delivery, the Survey adds. Constraints to policy making due to strict adherence to rules and abundant caution in bureaucratic decision-making favours status quo, the Survey cautions.
According to the Survey, redistribution by the government is far from efficient in targeting the poor. This is intrinsic to current programs because spending is likely to be greatest in states with better institutions and which will therefore have fewer poor.
The Survey notes that over the past two years, the government has made considerable progress toward reducing subsidies, especially related to petroleum products. Technology has been the main instrument for addressing the leakage problem and the pilots for direct benefit transfer in fertilizer represent a very important new direction in this regard, the Survey adds.
Noting that India has come a lo¬¬ng way in terms of economic performance and reforms, Economic Survey 2016-17 says that there is still a journey ahead to achieve dynamism and social justice. Completing this journey will require broader societal shifts in the underlying vision, the Survey adds.
The Survey lists the some of the challenges that might impede India’s progress. These challenges are classified by the Survey as follows: ambivalence about property rights and the private sector, deficiencies in State capacity, especially in delivering essential services and inefficient redistribution.
The Survey highlights difficulties in privatizing public enterprises, even for firms where economists have made strong arguments that they belong in the private sector. In this context, the Survey points towards the need to further privatize the Civil Aviation, Banking and Fertilizer sectors.
The Survey points out that the capacity of the State in delivering essential services such as health and education is weak due to low capacity, with high levels of corruption, clientelism, rules and red tape. At the level of the states, competitive populism is more in evidence than competitive service delivery, the Survey adds. Constraints to policy making due to strict adherence to rules and abundant caution in bureaucratic decision-making favours status quo, the Survey cautions.
According to the Survey, redistribution by the government is far from efficient in targeting the poor. This is intrinsic to current programs because spending is likely to be greatest in states with better institutions and which will therefore have fewer poor.
The Survey notes that over the past two years, the government has made considerable progress toward reducing subsidies, especially related to petroleum products. Technology has been the main instrument for addressing the leakage problem and the pilots for direct benefit transfer in fertilizer represent a very important new direction in this regard, the Survey adds.
Noting that India has come a lo¬¬ng way in terms of economic performance and reforms, Economic Survey 2016-17 says that there is still a journey ahead to achieve dynamism and social justice. Completing this journey will require broader societal shifts in the underlying vision, the Survey adds.
Fiscal activism embraced by advanced economies not relevant for India: Economic Survey 2016-17
India’s economic experience underscores fundamental validity of fiscal policy principles in FRBM Act 2003: Economic Survey 2016-17
India’s economic experience underscores fundamental validity of fiscal policy principles in FRBM Act 2003: Economic Survey 2016-17
India’s economic experience shows that the fiscal activism embraced by advanced economies- giving a greater role to counter-cyclical policies and attaching less weight to curbing debt- is not relevant for India. This observation was made in the Economic Survey 2016-17 presented by the Finance Minister Shri Arun Jaitley in the Parliament today. The Economic Survey has also stated that India’s fiscal experience has underscored the fundamental validity of the fiscal policy principles enshrined in the Fiscal Responsibility and Budget Management Act (FRBM) Act 2003.
Since the 2008-09 Global Financial Crisis (GFC), internationally fiscal policy has seen a paradigm shift from the emphasis on debts to deficits, arguing for greater activism in flows (deficits) and minimizing concerns about sustainability of the stocks (debt). But India’s experience has reaffirmed the need for rules to contain fiscal deficits, because of the proclivity to spend during booms and undertake stimulus during downturns. India’s experience has also highlighted the danger of relying on rapid growth rather than steady and gradual fiscal and primary balance adjustment to do the “heavy lifting” on debt reduction. In, short it has underscored the fundamental validity of the fiscal policy principles set out in the FRBM.
Even as the basic tenets of the FRBM remain valid, the operational framework designed in 2003 will need to be modified for the fiscal policy direction of India of today, and even more importantly the India of tomorrow. This setting out a new vision through an FRBM for the 21st century will be the task of the FRBM Review
Since the 2008-09 Global Financial Crisis (GFC), internationally fiscal policy has seen a paradigm shift from the emphasis on debts to deficits, arguing for greater activism in flows (deficits) and minimizing concerns about sustainability of the stocks (debt). But India’s experience has reaffirmed the need for rules to contain fiscal deficits, because of the proclivity to spend during booms and undertake stimulus during downturns. India’s experience has also highlighted the danger of relying on rapid growth rather than steady and gradual fiscal and primary balance adjustment to do the “heavy lifting” on debt reduction. In, short it has underscored the fundamental validity of the fiscal policy principles set out in the FRBM.
Even as the basic tenets of the FRBM remain valid, the operational framework designed in 2003 will need to be modified for the fiscal policy direction of India of today, and even more importantly the India of tomorrow. This setting out a new vision through an FRBM for the 21st century will be the task of the FRBM Review
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