Indian Economic Survey 2000-2001 Highlights

1. Real GDP growth rate of Indian Economy in 2000-01 is estimated at 6 per cent compared with a growth rate of 6.4 per cent achieved in 1999-2000 and 6.6 per cent in 1998-99.
2. The Indian economy has shown remarkable resilience in the face of substantial increase in the international price of crude oil over the last two years.
3. The reduction of overall growth rate of GDP to 6 per cent in 2000-01 is mainly due to a decline in the growth rate of service sector from 9.6 per cent in 1999-2000 to 8.3 per cent in the current year.
4. Production of foodgrains is expected to decline to 199 million tonnes in 2000-2001 from the record level of 208.9 million tonnes in 1999-2000.
5. The advance estimates of GDP indicate better performance by mining & quarrying, electricity, gas & water supply, and construction, in the current year compared to 1999-2000. Due to slightly better performance by these groups, the industry sector is expected to have higher growth in the current year despite reduction in the growth rate of manufacturing.
6. During 2000-01, the annual rate of inflation in terms of WPI has shown an increasing trend due to pressure from energy prices. The inflation rate hovered around a little over 6 per cent till September 2000 when the hike in administered prices of fuel products pushed up inflation to 7.8 per cent for the week ending September 30, 2000.
7. During the financial year the cumulative inflation rate was 4.8 per cent as on January 27, 2001 compared with 3 per cent during the corresponding period of 1999-2000. Given the trend, the year-end average rate of inflation in terms of WPI is expected to be around 6.5-7.0 per cent.
8. During 1999-2000, Government’s fiscal position remained under strain due to unanticipated expenditure on elections, 50 day war in Kashmir and the super cyclone in Orissa. The gross fiscal deficit of the Central Government increased from 5.1 per cent of GDP in 1998-99 to 5.5 per cent of GDP in 1999-2000.
9. On the external front, exports showed significant recovery in 1999-2000 from the negative growth in 1998-99. The current account deficit was contained at 0.9 per cent of GDP in 1999-2000, despite substantial increase in the oil import bill by 63 per cent due to hardening of international prices of crude oil and petroleum products.
10. Export growth rose further in 2000-01 due to Rupee depreciation alongwith further trade liberalisations, tariff reductions, and more openness to foreign investment in export-oriented sectors like information technology. The issue of India Millennium Deposits by the State Bank of India in October-November 2000 was very successful and raised more than US $5.5 billion of foreign exchange. The level of foreign exchange reserves (including gold and SDR) reached the record level of US $41.1 billion at the end of January 2001.
11. Trade deficit increased from US$ 7.6 billion in April-September 1999 to US$ 9.2 billion in April-September 2000.
12. According to estimates, Inflows of net invisible services increased from US $ 4.7 billion to US $ 5.2 billion resulting in an increase of current account deficit from US $ 2.9 billion to nearly US $ 4 billion during the same period.
13. On the capital account, there was a decline of net capital inflows from US $ 3.7 billion in April-September 1999 to US $ 2.5 billion in April-September 2000 due to net outflows of external assistance and external commercial borrowing and a decline of foreign investment in April-September 2000. Consequently, foreign exchange reserves declined by US $ 1.5 billion during April-September 2000. However, foreign exchange reserves began to build up after the successful issue of IMD.
14. A tentative assessment of the BOP outlook for the current year indicates that the current account deficit in 2000-01 might widen to about 1.5-1.7 per cent of GDP compared to 0.9 per cent of GDP in 1999-2000. This is mainly due to the surge in India’s oil import bill because of the tripling of international oil prices between early 1999 and mid-2000. On the other hand, non-oil import growth remains subdued. Exports, however, are expected to remain buoyant, as is evident from the growth rate of 20.4 per cent (in US Dollar value), recorded by the DGCI&S data for April-December 2000. Net inflow of invisibles, despite moderate increase in outflows on account of interest, dividend, royalty payments etc., is expected to remain broadly at last year’s level, supported by the continued buoyancy in software service exports and private transfers. The widening of current account deficit will, however, be more than matched by the expected net capital inflows.
15. The Economic Survey 2000-2001 concludes that the Indian economy has performed well over the past two decades. Average annual real GDP growth accelerated from 5.4 per cent during the 12 year period ending 1991-92 to 6.4 per cent during 1992-93 through 2000-2001. During this period, it has gone through significant structural change that has been induced by a continuous process of economic reforms. The pace of reform was intensified in the 1990s and the economy has responded well to the new changes that have been introduced in almost all sectors of the economy during this period. As a consequence, the economy has also shown a great degree of resilience even in the presence of adversities, such as the East-Asian financial crisis of 1997-98 and the abnormal increase in oil prices more recently.
16. In view of the many changes that have taken place, it is now quite possible for the Indian economy to attain an even higher growth path. However, crucial action is required in a number of key areas in order to obtain the full benefits of the reforms carried out so far. If these measures are accomplished in an organised manner in the near future, it is quite likely that many of the latent energies that are yet to be released in the country would become apparent and a higher level of economic activity would emerge.

Current Economic Problems and possible solutions

17. The Economic Survey 2000-2001 predicts a difficult year ahead for the Indian Economy. The major resons suggested for this being the irregular rainfall, slow down in Industrial growth and no increase in new investments. The problem is compounded by the persistence of high international oil prices and the slowdown of the American economy, which is likely to affect the rest of the world. Another factor is the massive earthquake in Gujarat which results in demand for huge investments.
18. Gaps in the reform process continue to cloud the long-term growth prospects of the economy. The fiscal situation has worsened since 1996-97. Outstanding Liabilities (non-RBI) of the Central Government has risen to 51.8 per cent of GDP in 1999-2000. More disturbing, it has been on an uptrend since 1996-97 when it reached a low of 46.4 per cent of GDP. This, more than any other indicator, encapsulates the issue of fiscal unsustainability, while more conventional indicators serve to flesh out the picture.
19. The central fiscal deficit has risen to 5.5 per cent of GDP in 1999-2000, up from a low of 4.1 per cent of GDP in 1996-97. The revenue deficit showed a similar pattern and at 3.5 per cent in 1999-2000 is now higher than the 3.3 per cent in 1990-91. Though the primary deficit of 0.8 per cent of GDP in 1999-2000 is 2 percentage points lower than in 1990-91, this is primarily due to a 1.9 percentage point reduction in capital expenditure. Interest payments have risen to 4.7 per cent of GDP in 1999-2000 from 3.8 per cent of GDP in 1990-91. Though the Union Budget of 2000-01 has tried to reverse these trends, sustained efforts will be required in this direction in the face of exogenous shocks like the Gujarat earthquake.
20. he key problem affecting the Indian economy is the persistence of high fiscal deficit at both the central and state levels. There is need to bring down the overall centre and states gross fiscal deficit of 10 per cent of GDP. The persistence of high fiscal deficit has reflected itself in an increasing share of debt service in the expenditure budget of both the central and state Governments. Consequently, the ability of Government at any level to undertake significant public investment has been seriously eroded. This has led to a decline in demand for Indian industrial goods. The lack of public investment has also slowed down private investment in infrastructure. The continued high borrowing, as a result or the high fiscal deficit has also kept real interest rates high in the economy. Thus, industry faces extremely high real interest rates of 8 per cent to 10 per cent, which would be among the highest in the world. It is therefore difficult for private industry, both foreign and domestic, to undertake new investment with any degree of confidence. The key area for action, for instilling confidence in the economy, pertains to a credible medium term programme for fiscal improvement. This has acquired new urgency at this juncture.

Key problems

21. The changes in the components of fiscal deficit over the last decade give an indication of the reasons as well as potential solutions to the fiscal problem. Gross tax revenues of the central Government have declined between the period 1980-81 to 1991-92 and 1992-93 to 1999-2000 by 0.9 percentage points of GDP. This decline is primarily due to a fall in the indirect tax revenues by 1.6 percentage points. In contrast, direct taxes have increased by 0.7 per centage points of GDP. This rise compensated partially for the decline in customs revenues but was unable to prevent the overall ratio from declining. Among indirect taxes, though the decline in customs revenue was expected that in excise revenue was not.
22. Another significant factor in the current fiscal problem is the administered interest rates on Government pension and provident funds. The nominal inflexibility of these rates means that they have not varied with the rate of inflation, resulting in very high real interest rates on Government debt when inflation declined. With decline of inflation (WPI) from an average of 11 per cent during 1990-95 to an average of 5.6 per cent during 1995-99, real interest rates on pension and provident funds jumped from an average of 1 per cent to 6.3 per cent. Implicit interest rate floors on short term markets and the underdeveloped nature of the market for Government securities and treasury bills, have also contributed to the increasing, high rates of interest on Government debt.
23. High fiscal deficit puts upward pressure on market interest rates and international risk premium and raises the cost of capital for all producers. Crowding out of private investment by public borrowing also remains a potential threat to any industrial recovery. The central and state Governments have little money to spend on public goods and basic non-commercial infrastructure, whose quality continues to deteriorate. Inefficient monopolies, such as in power, impose additional costs that undermine the competitiveness of Indian manufacturing and agriculture. Other gaps in the reform process, such as those relating to labour laws and procedures, bankruptcy, land ceiling and rent control and small scale industry reservation, inhibit industrial restructuring, raise costs and reduce international competitiveness. The high industrial and GDP growth rates seen during 1994-95 to 1996-97 can be replicated only if these critical gaps in the reform process are attended to.

Possible solutions

Privatisation

24. In the last half century, the Government’s production activity has expanded along with fiscal deficit & dis-saving. At the same time, investment in public goods and basic physical & social infrastructure has been starved of funds and their quality has deteriorated. It is necessary to get the Government out of the business of production and enhance its presence and performance in the provision of public goods. Governments, with their elaborate bureaucratic structures, multiple layers of accountability and complex crosschecks, are unsuited to the demands of commercial production in a competitive, fast growing economy. This has been recognised in principle and a privatisation process has been initiated. Privatisation will allow Government’s capital expenditure to be allocated to public goods and basic infrastructure that is not commercially viable. A significant portion of Central capital expenditure could be reallocated this way, if all public sector units producing private goods are sold to the public. The funds received from privatisation would also help in reducing the public debt incurred for setting up these units and will put the debt-GDP ratio on a sustainable path. Most importantly, privatisation would enable the competitive public enterprises to function effectively once again and would help them in contributing to the national economy.
25. A significant portion of the Indian basic industry remains in the public sector. Because of the lack of resources, public sector industrial growth in the 1990s has been significantly lower than that of private sector industrial growth, and also lower than its own growth in the 1980s. Thus accelerated privatisation of the competitive segment of the public sector should also serve in stimulating industrial growth.

Expenditure control

26. Expenditure management has been conceived as a major plank for second-generation reforms. The core issue in this regard is minimisation of wasteful expenditure and reallocation of funds to public goods, basic infrastructure and social welfare. The Fiscal Responsibility Bill and the reports of the Expenditure Reforms Commission are designed to move the expenditure structure in this direction.

Defence expenditure

27. Defence expenditure had fallen from 2.7 per cent of GDP in 1990-91 to 2.2 per cent of GDP in 1996-97. Given the heightened threat perception after Kargil, this has now risen back to the level at the beginning of the 90s. If the increased demand on the equipment budget of the defence services is to be met without raising the ratio further, there is need for a deep & comprehensive introduction of modern management systems. This must cover all the defence production units, procurement systems, supply chain management, logistics and inventory.

Subsidies

28. Subsidies are similar to indirect taxes in that they open a gap between the cost of production and distribution, and the price paid by the subsidised buyer. With the exception of completely inelastic goods, they distort the pattern of consumption. Large subsidies have the even more serious problem of providing incentives for rent-seeking diversion and corruption. The larger the unit subsidy the larger is likely to be the leakage. As revealed in the study on subsidies conducted by the National Institute of Public Finance & Policy (NIPFP), the indirect cost of subsidies is much greater than the direct budgeted subsidies. Thus, there is a need to reduce subsidies, target remaining subsidies on the poor and search for more efficient mechanisms for protecting the poor. This requires progress in reforming the existing control systems governing the fertiliser, petroleum and sugar sectors.
29. The retention price system in fertiliser is one of the most anachronistic. Various studies have shown that depending on world prices, anything between 50 per cent to 75 per cent of the fertiliser subsidy goes to the producers. Several committees, such as the Hanumantha Rao Committee and the Alagh Committee, have recommended its disbandment. The sooner this is done, the quicker will normal market incentives for improvement in productivity of investment and energy efficiency come into operation. To minimise the effect on farmers, the prices of fertiliser and natural gas should move towards parity with international prices, through appropriate customs and excise duties. As the current price to farmers is close to the landed cost of urea, this is an appropriate time for aggressive action in this direction.
30. The coal and petroleum sectors also need to be deregulated so that fertiliser and power producers are free to use any energy input, domestic or imported. Deregulation of the coal & petroleum sectors will also ensure that domestic producers of these products face the rigours of competition on a fair and equitable basis. A competitive system will ensure that fertiliser and power producers get the best inputs at most competitive prices.
31. A number of other reform measures need to be taken for ensuring that the profitability of farming is enhanced and that the rural poor can share in the gains of efficiency and productivity improvement. There is need for comprehensive decontrol of production, storage, transport trade (domestic & external) and processing of agricultural goods and the inputs used in agriculture. The management of the food economy needs comprehensive reforms, including a change in the monopoly role of the FCI (Food Corporation of India) and in the administration of the PDS. Food subsidies could be either channelled into guaranteed unskilled manual employment that is self-selecting (incentive compatible) or into a food or income supplement system (for the poor) using the latest smart card technology (including stored finger prints). The sugar sector (including its inputs) should be decontrolled, removed from the PDS and the tax incidence on sugar manufacturing should be rationalised. Given the current surplus in production, these measures will ensure that the market price of sugar is close to the price currently being paid by the poor. In the long term there will be a powerful incentive for increasing efficiency through economies of scale and scope.
32. Co-operatives and user groups should be allowed to run the irrigation system, so that it is properly maintained and regulated for the benefit of all farmers. Forward, futures and option markets should not only be allowed in all agriculture related goods, but should be actively encouraged by the Government.
33. Internet telephony needs to be opened up so that Internet access and telephone can be bundled together to take the information communication revolution to the rural areas.

Departmental enterprises

34. Many observers have noted the large size of the Government in terms of number of employees. Few, however, realise that this is largely due to the bloated size of departmental public enterprises (DPEs) whose staff are technically employees of the Government and are shown in budget documents as such. Many would say that this is quite apt as they are infused with bureaucratic culture, subject to CAG audit and the political pressures of parliamentary oversight. This has resulted in massive overmanning of these enterprises (DPEs), a running down of capital and deterioration in service quality. The conversion of these departmental enterprises into companies is essential for infusing them with commercial culture and subjecting them to market incentives and competitive pressures. The identification of “public sector” with “state monopoly” needs to be replaced by a public sector that is owned by the people/public. Shares in these newly formed companies would then eventually be sold to the public, while retaining majority only in companies producing major defence systems. The funds generated from the sale of shares could be used to repay debt incurred by and for them. An independent regulatory authority would have to be simultaneously set up to cover ‘natural monopoly’ segments like the rail track network.

Downsizing Government

35. In contrast to the DPEs, downsizing of the Government administration per se, will not result in much fiscal saving. The primary purpose of such downsizing is to eliminate bureaucratic controls and to change the anachronistic command mentality still prevalent in the system. Accordingly, all employee positions of this nature must be identified and eliminated. For this to be truly effective & sustained, divisions, departments and ministries, whose primary purpose was to control and direct the economy, must be abolished. Once this is done, the Government will be forced to become a facilitator of economic growth and investment. It can then sharpen its focus on the provision of public goods and critical non-commercial segments of infrastructure, much of which is in rural areas where a majority of the poor live.

Tax reform

36. The direct tax reform strategy of reducing rates, broadening the tax base and modernizing tax administration has been by and large successful. Despite the rise in effective marginal rates due to levy of surcharges during the last two years, the rise in the direct tax to GDP ratio has been sustained in the short term. Maintenance of the long-term faith of honest taxpayers requires that the personal & corporate income tax rates be kept at levels that eliminate the incentives for tax evasion. Deeper and more systematic efforts are also needed for weeding out economically unjustifiable exemptions and deductions. A wholesale modernisation of the tax administration is required including extensive use of information technology, data warehousing, data mining and analysis and use of economic data. Auditing systems and procedures must be such that high-income taxpayers who are more likely to evade taxes get picked rather than those who declare the most income and pay the most tax.
37. The central excise system has been radically changed over the past decade. Though the introduction of CENVAT was supposed to complete this process of rationalisation and simplification, some lacunae have remained, which need to be ironed out. When completed, this process will result in a simple but equitable indirect tax system that will be easy for honest taxpayers to comply with. It will also make it more efficient and effective in blocking excise evasion. Further, a proper CENVAT will also be easily evolvable into a national VAT.
38. IBringing more services under the tax net can offset the likely loss of revenue through lower customs tariffs. The growing contribution of services to GDP makes the sector conducive for mobilisation of greater resources. A technical committee on service tax was set up during the second half of 2000 and has submitted its interim report. Implementation of this report will help in setting up an economically rational service tax that can be integrated at a subsequent stage with the CENVAT. A comprehensive service tax combined with an efficient CENVAT could help in raising indirect tax revenues to the levels that prevailed earlier.
39. This will also make it possible to continue with the customs duty rate reductions. Our basic (protective) customs duty rates are still among the highest in the world and there is broad agreement on the need for reducing them to Asian levels. This is essential for pressurising industry and trade to increase efficiency and improve the competitiveness of the Indian economy. The rate reduction, however, must be accompanied by factor market & infrastructure reforms that make it possible for industry in adapting and introducing new technology, improving the productivity of labour, capital and land use and competing in domestic and international markets.

Interest costs

40. One reason for the fiscal deficit continuing to be high despite a decline in the primary deficit is the rise in interest costs. One of the key issues in this regard is the system for setting of interest rates on Government debt in the form of provident and pension funds. By their very nature, these rates are set by the Government. The administered interest rates on pension and provident funds must take account of the inflation rates, the effective term of the deposits and available tax exemptions. This will ensure that the after-tax real rate of interest paid on these borrowings reflects the market rates and is consistent with the overall demand and supply conditions in the debt market. The interest rates paid on small savings instruments must be benchmarked against equivalent market instruments
41. The loan and debt market in the country has limited flexibility due to implicit floors on interest rate. This is reflected in the fact that nominal inter-bank call money rate on overnight and one day borrowing has very seldom fallen below 8 per cent. This is despite the fact that in recent years inflation has gone as low as zero for an entire month. Thus, despite the decline in inflation during the past decades, real overnight rates have been very high compared to global rates. Though the high fiscal deficit is a factor for medium to long-term rates, it is difficult to conceive it playing a major role in overnight markets. The market for Government securities and treasury bills also requires to be adequately broadened and deepened. This requires comprehensive decontrol and provision of a level playing field, so that potential retail investors have convenient access to these securities through the stock markets.

Domestic reforms

42. Alongwith the application of competitive pressure, Indian industry must be provided the right environment for being able to compete. With the economic policy changes that have taken place in the 1990s, along with the worldwide changes that have occurred in the economic environment, it is essential for industry to become capable of restructuring on a continuous basis. Measures to promote such restructuring include factor market reforms, an end to any remaining investment controls and provisions for progressive improvement in infrastructure services. These reforms will also help Indian industry in meeting the challenge of imports resulting from the removal of the remaining import restrictions.
43. These issues assume greater importance in the light of the industrial growth experience of the 1990s. The industrial policy reforms of the 1990s, opening of foreign direct investment, improvement in access to foreign technology, abolition of MRTP and the phased manufacturing programmes, had led to an expectation of sustained higher growth in industrial production. After some exuberance in the mid-1990s industrial growth has slowed down. It is likely that this has happened due to the existing rigidities in factor markets. Capital remains locked up in sick enterprises due to dilatory bankruptcy procedures. Labour mobility is hampered by the existing labour laws and land utilisations by the Urban Land Ceiling Act and rent control laws. Consequently, resources in the industrial sector have not been able to move to more productive uses, in particular towards labour using employment generating industries, that could lead to higher industrial growth on a sustained basis.

Bankruptcy law

44. Inclusion of modern bankruptcy provisions in the Companies Act, repeal of SICA (Sick Industrial Companies Act) and dissolution of BIFR (Board for Industrial and Financial Reconstruction) will facilitate restructuring of Indian industry. The delays currently inherent in the BIFR process that prevent quick reorganisation of sick companies, or closure when required, should be eliminated. This would benefit shareholders, lenders and labour to move to more productive pursuits, thereby promoting industrial growth.

Labour laws and procedures

45. The contract labour law, as it exists today, makes it impossible for genuine small-scale entrepreneurs to provide services to industry. A modern contract labour act should encourage outsourcing of services so that new employment is generated. Labour laws and procedures have reduced the incentive for organised labour to work efficiently and have made it unprofitable for organised industry to generate new jobs. Greater flexibility is essential if Indian industry is to compete with Chinese industry and generate as many new jobs as the latter has.

Urban Land Ceiling

46. The states need to follow the lead of the centre and repeal the Urban Land Ceiling laws.
47. The above three reforms will facilitate industrial restructuring and make it possible for capital and skills to move quickly out of declining industries and into rising ones.

Small scale industry reservation

48. Small scale industry reservation is a variant of investment control. Whereas special support policies for small and medium enterprises are found in most countries of the world, developed and developing alike, the policy of small scale industries reservation is unique to India. In view of the imminent removal of all restrictions on imports in April 2001, the time has come to give up reliance on reservation as an instrument for supporting SSI. Labour intensive industry can then exploit economies of scale and scope and thus reduce unit cost of production to those of Chinese imports. As many SSI reserved goods (like bicycles, agricultural implements, garments) are used by the bottom half of the population, dereservation will also raise the real income of the poor and generate further demand for these goods.
49. This reform, along with the previous three, will enable organised industry to move out of capital intensive manufacturing and enter labour intensive manufacturing, and generate new employment at a much faster pace. Its ability to compete with Chinese imports will strengthen manifold and exports of labour-intensive goods will expand.

Power reform

50. The pricing of power at (efficient) cost of production-cum-distribution is not just a fiscal necessity, but essential for keeping the system from collapsing. Transmission and distribution losses need to be tackled on a war footing to make efficient pricing feasible. A special task force may be needed to be set up to push power sector reforms with state Governments in an organised manner. A modern Electricity Bill has been drafted. Its adoption will help in enabling the reform of State Electricity Boards so that the public, private and cooperative sectors can compete under a sound and independent regulatory regime.

States fiscal deficit

51. In 1999-2000, the combined fiscal deficit of the centre and states was estimated at nearly 10 per cent of GDP, an increase of almost one percentage point from 1998-99. The revenue deficit is also threatening to reach unsustainable limits.
52. The RBI study on states’ finances shows that the states’ debt to GDP ratio, which had declined from 19.4 per cent in 1990-91 to 17.8 per cent in 1996-97 has jumped to 21.4 per cent in 1999-2000 (RE). It is budgeted to jump further to 22.9 per cent in 2000-01. The states’ primary deficit in 1999-2000 was about 0.7 per cent of GDP higher than in 1990-91. In contrast to the central Government guarantees, which have declined as a proportion of GDP over the decade, the guarantees provided by the states have increased by 0.6 per cent of GDP between 1995-96 and 1999-2000. The result of this fiscal deterioration is that states’ expenditure on social sectors have remained stagnant. There is little money for improving the reach and quality of education services or of public health.

Social sector reform

53. Till the fiscal situation is brought under control, it is unlikely that states will have more funds spending on improvement of education. Besides improving the efficiency of public expenditure, private and cooperative efforts must be harnessed for filling the growing gaps in Government provision of education. This requires a simple, non-bureaucratic policy framework for private provision of all education services. The regulatory system must be modernised to free serious educational institutions from oppressive controls while laying greater stress on detecting and punishing fraudulent operators.
54.  Similar reforms must be made in the case of urban infrastructure services so that maximum possible private participation can be elicited. The state Governments can then divert their limited investment budget into public goods and basic infrastructure services for the poor urban and undeveloped rural areas.
55. States also need to repeal the World War II era rent control acts that have been major contributors to the creation of urban slums. As the rent control acts basically serve to expropriate and transfer rental accommodation from the owner to the renter, they provide a powerful disincentive for the construction of rental accommodation. In countries without such laws, the poor and lower middle class live in rented apartments. In Indian metros, they rent accommodation in slums where there are no rent control laws. This reform, along with a forfeiture law and modernisation of municipal rules and regulations, can unleash a real estate boom that will generate hundreds of thousands of jobs and move people out of slums into proper rental accommodation.
    • Indian Economy at a difficult stage, growth problems likely in 2001/2002 (April-March).
    • Gross Domestic product growth on 2000/2001 (April-March) seen at 6 per cent vs 6.4 per cent in 1999/2000
    • Gaps in reforms process cloud long-term economic growth prospects.
    • Reforms needed in bankruptcy and labour law to boost industrial growth.
    • Indian Government favours market linked small saving rate.
    • Current account deficit in 2000/2001 seen at 1.5-1.7 per cent compared to 0.9per cent in 1999/2000.
    • The government favours bringing in more services under the tax net.
    • Farm, allied sector growth in 2000-01 seen at 0.9 per cent compared to 0.7 per cent. Foodgrains output seen sharply down at 199 million tonnes compared with record 208.9 million tonnes. Oilseeds output in 2000/01 seen sharply down at 18.6 million tonnes.
    • The government favours total decontrol of sugar sector.