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It's not good we're feeling - The Indian Express

Editorial ()
27 February 1997

Title : It's not good we're feeling
Author : Editorial
Publication : The Indian Express
Date : February 27, 1997

The purpose of the pre-Budget Economic Survey is to give an
overview of past and present economic performance as well as a
sense of what is to come. Together with the Budget, it constitutes
a basis for economic expectations, which have a way of fulfilling
themselves by influencing the mood of business and capital markets.
Well-founded optimism in the Economic Survey, together with
reinforcing such optimism through Budget proposals, is good. The
operative phrase is: "well founded". The Economic Survey for
1996-97 tries too hard to foster the economic "feel-good" factor in
the face of indications that it is not warranted. It thereby
compromises its credibility and hurts not boosts public
expectations. It does this through overemphasis on good past
economic performance and defensiveness about present discouraging
trends. It overplays the wrong reasons for these trends and simply
leaves out projections for future performance where they may have
the opposite of a feel-good effect.

External debt will apparently remain "within manageable limits". At
over $92 billion, is it manageable now? The Survey tries to
explain away the drastic fall in non-oil imports as only partly
attributable to an industrial slowdown. It says that the impact of
initial trade liberalisation has petered out and import and export
growth rates have returned to their old pace. This could yield two
possible conclusions. One is that future import-export growth will
depend on further trade liberalisation. The other is that
henceforth it would be unreasonable to expect high import and
export growth rates. If it is the first, why does the Survey shy
away from saying so? If it is the second, such defeatism can only
alarm. The fact is that high import and export growth rates are
associated with a vibrant economy, and when their slowdown goes
hand in hand with a drop in industrial growth and far slower growth
in bank lending to the private sector, the only inference is: a
slowdown. The industrial slowdown itself is blamed almost wholly
on the poor performance in the electricity and mining sectors. Not
to mention that poor performance in these sectors is to be blamed
squarely on Government policies, this is a brazen attempt to
deflect responsibility for too-high interest rates which choked
demand for credit to the point that bank credit to the private
sector grew by only around 5 per cent last year. The Survey worries
about rising inflation and stresses the importance of containing
the fiscal deficit. Yet no serious cure for runaway Government
spending is suggested: the Expenditure Commission proposed in last
year's Budget is not even mentioned.

If the Survey had been forthcoming on these points, it would have
held out the promise that policy mistakes had been acknowledged,
and there would be attempts to correct them. Policy correctives may
not fend off an economic slowdown now, because their impact is felt
with a lag, but they could at least improve expectations. Window
dressing will not do that.

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