The chief economic advisor to the Union ministry of finance, Krishnamurthy V Subramanian, has continued the practice initiated by his predecessor Arvind Subramanian in 2014, of presenting the Economic Survey in two volumes, together with a separate volume as a Statistical Appendix.
This format had been inspired by that of the World Economic Outlook of the International Monetary Fund (IMF), as Arvind Subramanian had explicitly stated while introducing the Economic Survey in 2014. In the case of both Subramanians, the influence of the IMF (and its ideological twin, the World Bank) goes far beyond the format of the survey and permeates the entire thinking that underlies it. This is true, notwithstanding the claims made by the author of the current survey that the ‘equilibrium approach of classical economics’ has been eschewed by him.
The first volume of the survey claims that the Indian economy performed well in the last five years, the implicit and unstated yardstick being official GDP growth rates. It also makes the astounding claim that ‘… the government has ensured that the benefits of growth and macroeconomic stability reach the bottom of the pyramid.” It anoints private investment as ‘the key driver of growth, jobs, exports and demand’, echoing the standard neoliberal view.
It calls for reliance on such private investment to achieve the goal of becoming a US$5 trillion economy by 2024-25, though it provides no convincing reasoning for the validity of such a goal without reference to its composition and distribution, its specific impacts on different sections of the population, on the environment and so on. It invokes “the high growth experience of East Asian economies” which it reads in terms of especially export growth, arguing that high savings rates (to sustain the high investment rates necessary for high growth rates) would limit the growth of consumption. It blithely dismisses the concern over jobless/job-loss growth. The survey also claims that insights from behavioral economics can be used to bring about the behavioral changes of the Indian people that it considers necessary for its policies to achieve the objectives set out. It also goes into the notion of data as a public good, the case for judicial reform, the presumed necessity for policy consistency and the need to ensure that small and medium enterprises grow into large entities, which alone, in the view of the Survey, will accelerate job creation.
Insensitivity to key issues
In putting forward its arguments, the survey displays breathtaking insensitivity to key issues of social concern even while not feeling compelled to offer clinical and solid evidence for its propositions. For instance, it invokes support from religious books of various faiths for ‘nudging’ (coercing?) people towards what it considers “desirable behavior”. Is this the path that we as a country wish to follow? On treating data as a public good, it makes the outrageous statement that, “In thinking about data as a public good, care must also be taken to not impose the elite’s preference of privacy on the poor, who care for a better quality of living the most”. Its implicit assumption that the poor care little for privacy is reflective of its stereotyping of the poor rather than the outcome of any evidence based study of the preferences of the poor in this regard, or for that matter, of the elites who historically have not been known to have exhibited great sensitivity towards the needs of the poor for privacy.
The survey invokes in its typically cavalier style, “the spirit of the Constitution of India” to argue that data must be made a public good and this should “become the mantra for the government”. Arguing that economic policy uncertainty dampens growth, the survey claims that such uncertainty continued to decline after 2014, making one wonder whether the demonetisation disaster, the hasty and ill planned implementation of a very poorly designed GST architecture and the government diktats on cattle market transactions, all of which have caused much avoidable damage to the economy, would be consistent with this idyllic picture. Departing a bit from its overall orientation, the Survey ends by stating that “an effective minimum wage policy is a potential tool not only for the protection of low paid workers but is also an inclusive mechanism for more resilient and sustainable economic development.” One should perhaps not read too much into this statement.
Painting economy in rosy colours, hiding facts
The second volume of the Economic Survey resembles, at least to some extent, what the surveys used to look like before neoliberal experts from North American universities took over the task of writing them. It goes into the nitty-gritty of what has happened to the economy over the last year. Here again, we have the huge problem of credibility of government data on economic aggregates, flagged by Arvind Subramanian.
Predictably, the survey seeks to present the economy and its prospects in rosy colours, despite grim evidence to the contrary. It lauds the “achievement of low rates of inflation”, ignoring that this does not always correspond to people’s experience on the ground, and more importantly, that it has come at the expense of a disastrous agrarian crisis marked by falling output prices as well as falling/stagnant real wages for rural workers. The fact that much of the decline in inflation rates came from a sharp and sustained decline in international prices of crude oil between 2014 and 2016, with these prices still below their historic highs in the years 2012-2014 is also worth noting.
Uncritical view of fiscal matters
The self-congratulatory statements in the survey on financial sector reforms including the IBC are dangerously misplaced, and we may in fact be on the cusp of a major banking and financial sector crisis if international developments go awry. The survey takes a rather benign view of the many bilateral trade agreements we have been rushing into in recent years, without a thought for the implications of these agreements for the vulnerable segments of Indian producers in agriculture and allied activities as well as in small and medium industries.
There is avoidable hot air in the survey, an instance being the reference to the mystical “zero budget natural farming”. The text of the survey seeks to give an impression of significant stepping up of expenditures on health and education, but these are not borne out by the data. Likewise, the survey uncritically repeats the central government’s claims on cooperative federalism when in fact there has been much avoidable centralisation of both resources and policies. It does, however, admit towards the end that, ‘several challenges on the fiscal front in 2019-20 include revenue implications on account of apprehensions of slowing of growth, revenue buoyancy of GST and provisioning for schemes such as PM-KISAN without compromising the fiscal deficit target.’ Here again, however, the obsession with reduction of fiscal deficit solely through expenditure reduction and imposition of more indirect tax burdens on common people is evident.
The two volumes of the Economic Survey, notwithstanding the disavowals of its author, follow the neoliberal guidebook. Even when invoking the East Asian countries with high growth rates, the roles played by comprehensive land reforms, substantial public investments in health, education and infrastructure, and the leading role of the state in all these cases do not find a mention.
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