Economic Outlook, Prospects, and

Policy Challenges
1.1 INTRODUCTION
A political mandate for reform and a benign
external environment have created a historic
moment of opportunity to propel India onto
a double-digit growth trajectory. Decisive
shifts in policies controlled by the Centre
combined with a persistent, encompassing,
and creative incrementalism in other areas
could cumulate to Big Bang reforms.
As the new government presents its first full-year
budget, a momentous opportunity awaits. India
has reached a sweet spotrare in the history of
nationsin which it could finally be launched on a
double-digit medium-term growth trajectory. This
trajectory would allow the country to attain the
fundamental objectives of wiping every tear from
every eye of the still poor and vulnerable, while
affording the opportunities for increasingly young,
middle-class, and aspirational India to realize its
limitless potential.
This opening has arisen because facts and fortune
have aligned in Indias favour. The macro-economy
has been rendered more stable, reforms have been
launched, the deceleration in growth has ended
and the economy appears now to be recovering,
the external environment is benign, and challenges
in other major economies have made India the
near-cynosure of eager investors. Daunting
challenges endure, which this Survey will not ignore,
but the strong political mandate for economic
change has imbued optimism that they can be
overcome. India, in short, seems poised for
propulsion.

01
CHAPTER

Any Economic Survey has to grapple with

prioritization, to navigate the competing pitfalls of
being indiscriminatorily inclusive and contentiously
selective. Accordingly, this Survey will focus on
the two broad themescreating opportunity and
reducing vulnerabilitybecause they are the two
pressing themes of the day and which between
them encompass the many key policy challenges
that the new government must address.
The outline for this volume of the Economic Survey
is as follows. A brief macroeconomic review and
outlook will set the context for the broader
thematic and policy discussions that follow. The
importance of economic growth, both for lifting
up those at the bottom of the income and wealth
distribution, and providing opportunities for
everyone in that distribution, cannot be overstated.1
Rapid, sustainable, and all-encompassing growth
requires a strong macroeconomic foundation, key
to which is fiscal discipline and a credible medium
term fiscal framework. These prerequisites are
discussed in Sections 1.2 and 1.6.
But wiping every tear from every eye also
requires proactive support from the government
in the form of a well-functioning, well-targeted,
leakage-proof safety net that will both provide
(minimum income) and protect (against adverse
shocks). This is also true in rural India where
economic conditions for farmers and labourers are
under stress. The policy issue now is no longer
whether but how best to provide and protect,
and technology-based direct benefit transfers will
play an important role in this regard (discussed in
Section 1.7.

Bhagwati, J. and Arvind Panagariya, Why Growth Matters: How Economic Growth in India Reduced Poverty and
the Lessons for Other Developing Countries, 2013, A Council on Foreign Relations Book, Public Affairs Books.
1