The Survey, tabled in Parliament today, says that fiscal and monetary policies must be aimed at moderating real rates of interest and ensuring adequate availability of productive capital to industry. This means that the coming Budget will try to restrain excessive market borrowing by the government so that ample funds are available to corporates for investment. The Survey points out that the climate for industrial investment and growth can be enhanced through bold economic policy initiatives, and stresses the need to keep investor confidence high.

The Survey has argued in favour of maintaining the market-responsive exchange rate determined by demand-supply factors but sounded a word ofcaution on capital account convertibility. It also talks of the need for steps to boost export growth, and revive the primary capital market.

Apart from expressing concern over fiscal slippages, the Survey notes the sharp slowdown in GDP growth, exports, agricultural output, industrial production, subdued capital market conditions and slow growth of non-food credit. It also makes an effort to prepare the country to face the threat of economic sanctions in the aftermath of the nuclear explosions.

On the fiscal side, the Survey says the government must try for a reduction in the revenue deficit over the medium term but at the same time made a case for continuing reduced levels of peak import duties on a wide range of inputs, intermediaries and capital goods by arguing that "it is likely to strengthen the competitive environment and yield productive gains in the future."

It also favoured channelising of insurance and provident funds for the development of infrastructure projects which required funds withlong maturity. Taking note of the economic slowdown, the Survey said that it was imperative to put back the economy on a higher growth path of the order of 7 to 8 per cent per annum. The GDP growth rate slipped to 5 per cent during 1997-98 from 7.5 per cent in the previous fiscal. To achieve the high growth path, it called for raising the savings rate to about 30 per cent of the GDP through a reduction of government dissavings, improvement in performance of non-traded infrastructure and restoration of export growth to respectable levels.

The Economic Survey also warned against fiscal slippages and added: "Pre-emption of credit by the government is likely to crowd out credit to private sector and raise interest rates. This in turn would dampen the recovery of private production and investment. It could also constrain the pace of financial liberalisation." The fiscal deficit as a percentage of GDP slipped to 6.1 per cent during 1997-98 as against the budget target of 4.5 per cent. One of the major areas ofconcern was deceleration of industrial production, which went down to 4.2 per cent during 1997-98 from 7.1 per cent in the previous fiscal. Various factors have been listed for poor industrial performance. Some are cyclical and others are a result of policies followed in the past. These include reduced investment, international uncertainty, lack of confidence, a lacklustre capital market, high interest rates, infrastructure bottlenecks, decline in export growth, etc.

The Survey has suggested a host of steps to improve flow of funds to industry. Many of them are to form a part of the budget to be presented on Monday. It has called for measures to induce banks to step up delivery of non-food credit to medium and small industrial units. Pointing out that the rate of interest was still high in view of the low inflation rate, the Survey suggested, "the banking system has to be reformed so that interest rates come down due to competitive pressures, greater efficiency and lower implicit taxation of bankingsector." The access of companies to debt markets also needed to be improved by widening these markets. Underlining the decline in resource mobilisation from the capital markets, the Survey suggests more measures to bring back small investors to the capital market. It calls for raising the level of corporate transparency and accountability of listed companies and capital market intermediaries. It also called for continuing efforts to modernise and improve regulatory and payment systems to get them on a par with developed countries.

As far as foreign investments were concerned, the Survey made a case for greater procedural simplifications in the area of Foreign Direct Investment (FDI). The Survey added that FDI was the most stable form of capital inflow and its share in the total capital inflows should be progressively increased. Arguing for bold economic policy initiatives, the Survey stated, "reform of inappropriate policies, unproductive programmes and inefficient public organisations and projects cangenerate hope and confidence in a more productive future." However, the ongoing economic reform process should be reappraised and revitalised to give the entire national development effort a more humane face.