The Institute of Chartered Accountants of India (ICAI) welcomes the Economic Survey 2012-13 which shows that although the economy exhibited moderate growth rate during 2012-13 but its growth rate is much higher and better than the global growth rate and growth rate achieved by developed economies.
The ICAI is sure that with strong economic fundamentals, the days are not far when the economy would move to higher rates of growth. The resilience nature of the economy and its prudential and cautious policy framework is surely going to bring back the economy on the high growth trajectory, the ICAI feels. The ICAI fully agrees with the Survey when it says that accelerating economic reforms is the key to stepping up of the economic growth. In fact, second generation reforms are long overdue opines ICAI. It rightly emphasizes that “Economic slowdown is a wakeup call for stepping up reforms”.
In ICAI’s opinion, India has always been a fighter. This is proved by the fact that while the world as a whole registered a growth rate of 3.3 per cent between 1980 and 2010, India achieved a almost double growth rate of 6.2 per cent. In fact, India's share in global GDP has more than doubled from 2.5 per cent in 1980 to 5.5 per cent in 2010.
ICAI feels that India’s growth rate is also likely to improve with various government measures planned for 2013-14. The likely improvement of growth from 6.1% to 6.7% for 2013-14 seems reasonable but there is a need to keep strict vigil on implementation and delivery mechanism. The ICAI fully agrees with the Survey when it says that the downturn is 'more or less over'.
Despite the slowdown, the service sector has shown more resilience, especially, the accounting services. The accounting services have been growing at around 6-7% since 2005-06 with 7.1% growth in 2011-12. This clearly spells out an important role which the Institute of Chartered Accountants of India and its members are playing as partners in economic growth of India.
In the survey, a special chapter has been added focusing on jobs that highlights that the future holds promise for India if it seizes the demographic dividend, as nearly half of the additions to the labour force till 2030 are expected in the of age group of 30-49.
The ICAI is of the view that since Indian labour force is likely to increase in near future, a multi-pronged challenge lies in providing an appropriate policy framework to harness the dormant talent and entrepreneurship to position the economy on a high growth trajectory. This necessitates:
- Speedy provision of quality infrastructure.
- Unburdening the Indian industry from the high levels of taxes and the distortive exemptions so that it becomes globally competitive.
- Simplifying tax-administration and making tax system transparent and hassle free.
- Efficient management and delivery of the social sector programmes.
- Keeping fiscal deficit and revenue deficit in check.
With the increased complexity of the nature of transactions and business structures the role of chartered accountants and the profession has shifted from mere accounting to providing total business solution encompassing expansion, greater competition and intelligent advice to the management. Indian accounting firms are increasingly getting integrated and are providing associated services such as management consultancy, corporate finance and advisory services in addition to their core business of accounting, auditing and tax services.
The country needs to take steps for reducing prices, especially, the food prices because of which the Consumer Price Index has remained at double digits, feels ICAI. And for this there is a need to balance demand and supply of food products. Since demand for these products is generally inelastic, there is a need to step up supply in the long run by having proper supply management.
Another area, which is a cause of worry, is rising Current Account Deficit Balance (-4.6%). For this, we need to push up FDIs, apart from improving exports, curbing imports,( mainly of oil and gold) . At the same time, further measures should be taken to ease the inflow of remittances, and diversify export of softwares. Similarly for improving government revenues PSUs can play a vital role.
Like the Survey, Institute is also optimistic that India is likely to meet fiscal deficit target of 5.3 % of GDP in 2012/13, despite "significant" shortfall in revenues. This can be done by augmenting revenues and prioritization of expenditures as is being done as a part of medium term fiscal plan.
For inclusive growth, the sectors such as agriculture sector cannot be ignored. The ICAI feels that the fruits of growth must reach to all strata of society. The Survey suggests that the key for improving agricultural growth lies in improving agricultural productivity, better management and consistent policies, stepping up of private investment in infrastructure, improved food stock management and food distribution policies. We welcome the initiatives in this regard.
The survey, worried about the continuous slow down in the industrial sector, rightly acknowledges that revival of investment in industry and key infrastructure sectors is the key challenge. It points out that there is a need to step up research and technology improvement activities, encourage more public private partnerships, improve investments in infrastructure and distribute profits back to investors. ICAI is sure that these changes would improve industrial growth. Involvement of private sector will also reduce the financial burden on the government.