How to read the economic survey
It seems to suggest that the worst is over. Is it?
M odern day Economic Surveys have transitioned into a hybrid of a health audit (of the economy) and an idea generator for the future. There are three ways to look at them. The first is in terms of numbers.
The state of the economy as analysed by the Economic Survey for 2019-2020 says that the economy may have bottomed out some time in the second half of the current financial year, and that next year will be better, with the economy growing by 6-6.5%.
Sure, the survey has got numbers wrong before. Last year’s economic survey, for instance, projected a growth of 7% this year. Still, it is true that some high-frequency indicators have turned for the better in recent months; and at least some of the many measures announced by the finance ministry in the past six months to boost growth should kick in next year.
Surprisingly, though, the survey lays the blame for the slowdown the Indian economy has witnessed over the past six quarters to global and cyclical factors. In truth, there is likely a significant structural component to the slowdown too, just as there are several domestic factors that have contributed to it. Some economists may also pick holes in the survey’s defence of India’s GDP numbers, which have had their credibility dented, among other reasons, by the former Chief Economic Advisor’s treatise on how they are overstated.
The second is in terms of big ideas to address pressing challenges — the creation of jobs, the poor health of State-owned banks, the funding of infrastructure, the disinvestment of State-owned companies and other such. There, Economic Survey 2019-2020 is a cliched mixed bag. Creating 80 million jobs over the next decade by becoming, like China, the factory of the world and a key node of global supply chains is more an aspiration than a solution. But a Temasek-like model (this is Singapore’s government-owned investment company) to speed up divestment — the idea is that the government will transfer its holdings to this company, which will manage them with a degree of autonomy, divesting appropriate bits as the opportunity arises — is a good plan. The survey’s analysis that Stateowned banks lost 23 paise of every rupee invested is worrying, but it isn’t clear whether technology and incentives (as recommended) will be enough to address this.
The third is the direction the Economic Survey seems to be suggesting for the country’s financial policies, both in the immediate Union Budget (this always follows the survey) and in the long term.
On that count, the survey can’t be faulted. It recognises the need to allow some relaxation in the fiscal deficit target for the current year as some experts have suggested (an idea this newspaper has endorsed). Reviving growth should be the primary priority. As for the broader philosophy, the chief economic advisor has said the theme of the survey itself is “wealth creation”, which is dependent on a “pro-business” policy, “competitive markets” and the absence of “government intervention” which, despite being well-intentioned, sometimes undermines the market’s ability to create wealth. A welcome addition, which is not in the survey, would be respect for the lawful “wealth creation” process, and would entail reining in tax authorities and investigative agencies from adventurism and ensuring continuity in rules, including those governing foreign investment.