The Economic Survey, placed in Parliament on Thursday, presents a roadmap for the tasks the government should undertake. These include reduction and rationalisation of subsidies, decontrol of oil prices, tax reforms, lifting bans on all future contracts, decontrolling sugar and fertiliser, and so on. The biggest items of reform are the disinvestment proposals in the Survey. It suggests selling 5-10 per cent equity in identified profit-making non-Navratna PSUs, listing of all unlisted PSUs and selling of a minimum of 10 per cent equity to the public, auctioning of all loss-making PSUs that cannot be revived, and negative bidding in PSUs with zero net worth in the form of debt write-offs.

The prescriptions are clear. The way forward is economic reform. The Economic Survey typically reflects the advice of the chief economic advisor to the government. The question is: will the government accept this advice? The first budget of UPA-II, to be presented in Parliament on July 6, will be the test. It could set the tone for the next five years. What can Finance Minister Pranab Mukherjee hope to achieve? He can strive to recreate the investment climate of the early ’90s and keep the growth momentum of the Indian economy going by implementing some part of the roadmap. UPA-II has, till now, been giving signals about inclusiveness and poverty reduction through its talk about welfare programmes such as the NREGA and the proposed Food Security Act.

In that context, not only is the Survey a very important signal about the pro-market intentions of the government, it is a crucial input into the sentiment that makes up the investment climate. There needs to be a realisation that much of what is proposed in the Survey is unlikely to be realised in a hurry. The government will be constrained wherever there is a need to change regulation, such as in the insurance bill. On the other hand, there are many things that can be done right away without requiring Parliament’s approval. For example, lifting bans on future contracts to restore price discovery is not something that needs a long process. Some of these issues, like this one, or oil, sugar or fertiliser policy, cannot be dealt with by the finance minister alone but need the prime minister’s intervention.