Highlights of the Economic Survey 2008-09

Finance Minister Pranab Mukherjee on Thursday tabled the Economic Survey for 2008-09 that prescribes doing away with cess, surcharges on taxes, including fringe benefit tax, and sweeping refroms in areas like petrol pricing and financial sector.

Following are the highlights of the pre-Budget Economic Survey: 2008-09.

Unleash reforms - phase out cesses, surcharges and transaction taxes (such as commodities transaction tax, securities transaction tax and Fringe Benefit Tax).
Introduce new Income Tax Code that results in neutral corporate tax regime.
7-7.5% growth possible in 2009-10.
Allow 49% FDI in defence and insurance; permit FDI in multi-format retail starting with food.
Proposes another round of fiscal stimulus including tax cuts and increase in expenditure.
Decontrol petrol and diesel prices; end Govt monopoly in railways, coal and nuclear energy.
Lift all bans on future contracts to restore price discovery; decontrol sugar and fertiliser.
Revitalise disinvestment programme to generate Rs 25,000 crore annually, list all PSUs and auction those beyond revival.
Economic growth decelerated in 2008-09 to 6.7 per cent from 9 per cent in 2007-08.
Fiscal deficit in 2008-09 shot up to over 6 per cent from 2.7 per cent in 2007-08.
Survey indicates FRBM-II to get back to path of fiscal consolidation.
Complete the process of selling 5-10 per cent equity in identified profit-making non-'Navratna' PSUs.
List all unlisted PSUs and sell a minimum 10 per cent equity to public.
Auction all loss-making PSUs that cannot be revived.
In PSUs with zero net worth, allow negative bidding in the form of debt write-off.
Auction 3G spectrum.
The auctioned spectrum must be freely tradable, with capital gains on spectrum to be taxed under the Income Tax Act.
Rationalise Dividend Distribution Tax to ensure full single taxation of returns to capital in the hands of the receiver.
Reform petroleum (LPG, Kerosene), fertiliser and food subsidies to reduce leakages and ensure targeting.
Limit LPG subsidy to a maximum of 6-8 cylinders per annum per household.
Phase out kerosene supply-subsidy by ensuring that every rural household has a solar cooker and solar lantern.
Review customs duty exemptions and move to a uniform duty structure to eliminate inverted duties.
Implement GST from April 1, 2010.
Rapid operationalisation of UID Authority within 3 months.
Agriculture growth fell sharply to 1.6 per cent in 2008-09 from 4.9 per cent.
Exports grew at 3.4 per cent to $168 billion in 2008-09 from $163 billion in previous fiscal.
Imports grew at 14.3 per cent to $287.75 bn from $251.65 bn Trade balance deteriorated to $119.05 bn from $88.52 bn.
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Their money is our money

By laying down that a company is either Indian or foreign depending on who owns 51 per cent of it and gets to appoint its board of directors, the government saves itself the tedium of determining whether an Indian joint venture's parents, or grand-parents, are one-eighth, or one-sixteenth, foreign. Where much of this circuitous 'grand-fathering' has taken place, in telecommunications, for instance, more room has been cleared for foreign direct investment (FDI).
At a fundamental level, however, ignoring proportionate indirect foreign investment makes sector FDI caps, ranging from 26 per cent in media companies to 74 per cent in telecom firms, redundant. Any Indian company can now funnel any amount of foreign money into any industry that is not a public monopoly.
This is a paradigm shift. Our policy on foreign capital has been easing ever so gradually since India opened up to the world in 1991.
This despite the fact that we save less than we invest and import more than we export. These two gaps, adding up to nearly 6 per cent of the GDP, have per force to be bridged by money from abroad.
India dips into a $1.5 trillion pool of FDI and hopes to draw in $35 billion in 2008-09, a target likely to be wide of the mark in this season of financial turmoil. At 18th place in a league of FDI destinations, a thicket of restrictions keeps multinationals away from the fastest growing emerging economy apart from China.
The economic case for more FDI is incontestable. The strategic argument is trickier.
If foreign capital can accompany an Indian company everywhere, the only way the government can effectively keep FDI out of sectors it deems sensitive is by shutting out all private capital. Public monopolies would be an unfortunate throwback after nearly two decades of privatisation, and patently impossible in sectors like the media.
Breathtaking in its simplicity, the redefining of FDI solves a big issue but throws up another equally big question. The guidelines that follow this week's announcement must address both.

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