Never before has an annual economic survey, as the one for 2008-09 tabled in

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the Lok Sabha on Thursday, been so bold in hoping to bring about reforms. The government will need to muster immense political courage to implement much of these.

If the intentions are translated into action, defence production and nuclear energy will be opened up to the private sector; multi-brand retailing will be allowed to have 49 per cent foreign direct investment (FDI), tax rates will be simplified and reduced, 5 to 10 per cent of government-owned companies’ capital will be sold, and opportunities available to foreign investors in debt, equity and money markets will be widened.

Some of the desired changes, however, are a reiteration of decisions taken in the past but stalled for a variety of reasons. For example, the government has once again said that insurance, too, will be allowed 49 per cent FDI — a decision taken earlier and easily implemented if a pending bill relating to the sector is passed by Parliament.

The survey talks of wide-scope changes also in education which go beyond what human resources minister Kapil Sibal proposed some days ago and ran into a political storm. For instance, the survey wants a ‘regulated entry of high- quality foreign and rated domestic institutions in higher education,’ besides continuing public-private partnership in the sector.

An overhaul of public land usage norms — which entail acquisition, an emotive issue with those losing their land — in both urban and rural areas has been advocated. Other points of the wish list include replacing food, fertiliser and oil subsidies with cash doles or coupons for the targeted beneficiaries.

The survey argues for another round of stimuli to pull the economy out of the slow lane. Despite the prevailing despondence, the survey thinks a 7 to 7.5 per cent GDP growth is still possible in this financial year.

The annual economic survey is not merely a state-of- the-economy report but also indicative of the government’s policy direction in the Union budget that follows.

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However, past experience shows that much of the good intentions invariably remain on paper as the government fails to muster the political courage to implement tough decisions.

This year the job is tougher and, given the gigantic task ahead, finance minister Pranab Mukherjee will have to sequence the intended reforms. How much of them he can actually pull off is a million dollar question.

For instance, the survey calls for a complete withdrawal of the road, education and health cess that is added to income-tax. The removal of the surcharge on corporate tax and personal income-tax for incomes of over Rs 10 lakh a year has also been advocated. This will entail a huge revenue sacrifice by the cash-strapped government.

When he unveils the budget on Monday, Mukherjee may try to implement some of these decisions. But some others will have to wait. For one, the transition to the mean rate of goods and services tax, at 10 to 12 per cent, slated to come into effect on April 1 next year, may be delayed because of unresolved differences between the centre and states on the issue. Another suggestion, for a review of customs duty exemptions, will be more easily accomplished.

Other ‘indicators’ include a complete withdrawal of the cash transaction tax (CTT), the securities transaction tax (STT) and the fringe benefit tax (FBT). Their revocation, as the survey suggests, will nudge states to weed out stamp duties and a multitude of transaction levies. Another suggestion is to shift the burden of the dividend distribution tax from companies to investors. Ignoring the controversies that the matter has generated in the past, Mukerjeee may go in for the change.

Making out a case for their withdrawal, the survey says revenue imperatives have led to the imposition of surcharges and all kinds of cess and taxes such as CTT, STT, FBT and DDT, “which have partly reversed the move towards a simpler system”.

On disinvestments the survey indicates the government wants to make it bold and is in a hurry. It sets a target of mobilising Rs 25,000 crore annually by selling 5 to 10 percent equity of some profit-making non-Navratna companies and a similar proportion of the capital of unlisted companies and get them listed. One bold recommendation is to auction loss-making public sector firms that cannot be revived.

For the corporate sector, the survey talks of a ‘hire and fire’ flexibility; this will require an amendment to chapter V of the Industrial Disputes Act.