By TIOL News Service

NEW DELHI, Feb 27, 2006 : RIDING high on confidence after a robust growth rate of 8.5 and 7.5 per cent in the two previous years, the Finance Minister today tabled the Economic Survey, which projected a growth rate of 8.1 per cent in the current year 2005-06. However amid the euphoria of growth in exports; hope of keeping annual point-to-point inflation to around 5 per cent, and good results of tax collections the Survey also gave some scary indication of fuel prices further being raised. Though the point-to-point inflation rate may hover around 5 per cent but the Survey has cautioned that the volatility in petroleum price could divulge an "uncertainty" in the inflation.

What was interesting to see in the Survey is the point which says that it is not the Public Sector Companies which are doing bad but comparatively it is the private sector which is actually looking sick. The data of Economic survey points out that it is the private sector that accounts for the maximum cases of industrial sickness and closure. Out of about 6,700 references received by the Board for Industrial and Financial Reconstruction (BIFR), almost 6,450 were from the private sector.

Well, after seeing the spiralling crude prices and all the bad news about India Inc, there may be some good news for the corporate world at least on the taxation front. Though it will be clear only tomorrow about what is there for the India Inc. but amid all the talks about FBT, Service tax and corporate tax, the Survey moots the idea for moderate taxes for the corporate world. The Survey says that to be globally competitive, “Indian industry needs to be unburdened from the high level of taxes and the distortive exemptions that provide perverse incentives".

On international front, while talking about WTO, the Survey says that though the Doha round got a boost at the Hong Kong meet but the sustainability is lacking on Doha Agenda and that in fact continues to impede expansion of global trade. Over all the biggest concern in the survey is the spiralling crude prices, and in this regard the survey says that limiting the impact of supply-side shocks requires dedicated efforts for expanding the global trade agenda.

Apart from the most important international issue (about crude prices); on the home grounds the economic survey urges the state governments to impose proper user charges, bring down the cost of interest and pension to reduce deficits, which was reduced to 3.1 per cent in 2005-06 from four per cent in 2004-05. Though the survey cautions the states about the loss incurring PSU and also reminds the respective governments about deteriorating fiscal situation (including growing interest and pension burden).

On the other front the Economic survey mooted for bold initiatives, for development of infrastructure by reforming tax and labour regime. Further, the survey cautioned that despite 8.1 per cent growth projected this year, there is a risk of hardening interest rates, higher inflation and fiscal deficit.

Yet another part of energy value chain the power sector too got a big attention in the economic report card of the government. The Survey underlines that it is important to embark upon the major reforms to tackle problem of power sector, as without doing so it would be difficult to move on to high growth rate.

Further the survey observes that inadequate investments in sectors like gas and coal sectors the performance of mining and electricity sector was jaded, which in fact contributed in a decline in industrial growth in the first nine months of the fiscal (from 8.6 per to 7.8).

Apart from all the problems and solutions the rosiest picture portrayed in the economic survey is the prediction, which predicts 50 per cent growth in India’s export. Well, to achieve this mark which will be US 0 billion in next three years will not come without any reforms and so the government need to push reforms and take measures to improve infrastructure facilities.

Highlights of Economic Survey: