Govt urged to address fiscal imbalance
Economic Survey 2001-02 on Tuesday asked the government to further deepen the economic reform process for achieving higher growth and said that crucial issue of fiscal imbalance needed to be addressed urgently to save the economy from the deleterious impact of high deficit.
"The deleterious impact of such a high deficit (of the central government) on the economy has been made worse by similar levels of deficit being recorded by the state governments," the Economic Survey tabled in Parliament cautioned and said despite efforts made to curtail expenditure and increase revenues, it had proved difficult to reduce fiscal deficit below five per cent of GDP.
The Survey said key problem faced by the economy was reinvigoration of economic growth in current decade for which the reform process would have to be further deepened.
It pointed out that the key disappointment of the 1990s reform process was inadequate employment generation, and said that a key issue for focus was achievement of employment-intensive growth path particularly in rural areas.
Outlining major initiatives for reviving growth and improving the overall health of the economy, the Survey said subsidies continued to pose a problem in expenditure structure of the central government and added that with reducing rates of poverty, justifiable food subsidy should also reduce proportionally.
The Survey said the time was ripe for carrying forward further financial sector reforms so that the real economy could benefit from modernised financial sector exhibiting higher productivity level.
Among other initiatives to improve the health of the economy, the Survey suggested "wholesale" modernisation of the tax administration.
"Wholesale modernisation of tax administration, which relies more on improved systems of compliance rather than traditional police methods are likely to yield greater dividends," the Survey said.
Seeking an establishment to check fraudulant activities for development of the stock market, the Survey said Indian
financial system needed to encourage convergence of different segments of finance and capital markets for emergence of financial conglomerates.
On industrial sector, the Survey said it was essential to accelerate the process of dereservation while following a labour-intensive and export-oriented policy and added that a proactive restructuring policy was required to address the issue of corporate debt restructuring.
The survey stressed on a paradigm polcy shift in agriculture for achieving a sustained higher growth and asked the government to remove obstacles prohibiting farmers selling directly to buyers, which made contract farming difficult.
Pointing out the inadequacy of regulatory mechanisms in infrastructure sector including railways, power, urban infrastructure and civil aviation, the Survey sought speeding up of reforms for giving a boost to growth.
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