India: Economic Survey 2009-2010

The Finance Minister tabled the Economic Survey 2009-10 in the Parliament today. In summary, the survey has sent out positive vibes for India's economic future over the next 3 to 5 years. This is notwithstanding the immediate concerns of inflation and stimulus withdrawal. With respect to the former i.e., inflation, the survey has warned that food prices would continue to rise further over the next few months. In the same breath, it has also recommended a gradual rollback of stimulus measures after assessing the impact on each sector.

Amidst all this, the survey seems extremely positive on India touching a double-digit growth rate over the next 4-5 years. As for the current and next financial years (FY10 and FY11), the survey has projected GDP growth of 7.2% and 8.75% respectively.

With the full effects of the economic reforms of the 1990s working through the system, the Indian economy has moved to a higher growth path. Overall, the key issues confronting India today are the sustainability of high growth with moderate inflation, and the inclusive nature of such high growth. The inclusive nature of the growth itself will be conditioned by the progress that is made in the areas of education, health and physical infrastructure. For this, the government needs to rise to the challenge of maintaining and managing high growth, bolster growth through fiscal prudence and high investment. Also, it needs to improve the effectiveness of its intervention in critical areas such as education, health and support for the needy.