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Just a day ahead of the B-Day, FM Jaitley presented Economic survey 2014-15 earlier today; unlike in the past, economic survey this year was widely anticipated to be more than just a pre-budget ritual. With the revised base year for computing macro-economic statistics, the Economic Survey pegs the GDP growth target for FY 2015-16 at 8.5 percent, signaling double digit economic growth is possible to achieve in near to medium term. Revised estimate of 7.4 percent for FY 15 is encouraging too, especially considering less than buoyant tax collections through the last fiscal. Softening of retail inflation, largely on account of halving of crude prices and supply side measures, is a major boost for the economy for the Government’s commitment to usher in multiple structural reforms beginning with this year’s union Budget.

Survey reveals expenditure management and overhaul of subsidy regime shall hold the key to reinforcing fiscal discipline in coming years, even though the economy is likely to achieve fiscal deficit target for FY ’15 target, given the government’s fiscal prudence and unusually favorable external circumstances.

There are a few bold statements too – for one, Survey underlines a powerful economic philosophy of eliminating revenue deficit, ie government borrowing should fund capital formation, not revenue expenditure; also, in order to achieve better fiscal discipline, there are signals that the Budget shall focus to improve the quality of public expenditure, both planned and unplanned, by moving from public consumption to public investment principle of budgetary allocation for public expenditure. Whilst the survey does reiterate medium term target of reducing combined deficit (ie current account and revenue deficits) to 3 percent, I would expect FM to indulge in reform announcements statement that deficit management targets are not worrisome especially considering benign external macro-economic fundamentals and a firm political mandate for NDA government.

The message is loud and clear – FM Jaitley is well placed to use this opportunity to herald major policy shifts and reforms; reignite public investments through demonstrating improved fiscal prudence and augmenting revenue collections; and finally, kick-off wider private participation across sectors to re‑energise stalled projects worth 7 percent of GDP.

Most certainly, there could not have a better build-up to the much anticipated Budget of this decade!

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