The Hindu Business Line : India's shine lacks lustre, says <I>The Economist </I>survey

INDIA'S economy is revving up, says The Economist survey of India. The flip side to this trend is that the country is not enjoying an investment boom and there are problems like "too big a deficit" and "too few jobs" that are staring at the face of Indian policy makers.

The survey suggests that India's shine lacks lustre and concludes that much of the present buoyant optimism is "overdone: or at least, based on hope rather than achievement."

At the same time, the survey also acknowledges that this (current times) is "a moment of shining economic opportunity for India." It notes that there is some evidence that an investment boom is in the offing.

So, how well placed is Mr Atal Bihari Vajpayee's Bharatiya Janata Party, if it were to succeed in leading its coalition to another election victory, in taking advantage of this economic opportunity? The survey suggests that the ruling coalition should be better placed to take advantage of the opportunity and pursue the necessary reform, than has been any government in recent years.

The survey, which advises cautious optimism on the economic prospects, draws attention to the even chance of deficit constraining growth (more than at present) rather than growth reducing the deficit.

According to the survey, many of the second-generation reforms rely on the State Governments and that the "finances of these governments badly need rehabilitation if the rural majority is to get much needed investment in roads, irrigation, education and health."

It also points out that in many poverty-stricken areas, the most serious problem is not lack of funds, or poor policy. It is the bureaucratic inability or unwillingness to deliver.

On the indirect tax front, the survey has held that reforms are no easier than any structural change. It has, in particular, highlighted that the introduction of a uniform national value-added tax (VAT) system has been repeatedly postponed in the country, thereby keeping the prices of Indian goods higher on account of cascading sales taxes.