Publication of the Annual Economic Survey, just before the Union Budget, is a much-awaited event. Giving a snapshot of the Indian Economy together with a SWOT analysis, every word of the Survey is precious for students of economics.
The spirit and thinking behind the Budget can be perfectly understood by perusing the Economic Survey, because both documents are drafted by the same set of economists. Painstaking research, unbiased statistics and unmatched scholarship ensure that the Economic Survey remains of interest long after the corresponding year’s Budget is forgotten.
The Economic Survey of 2016-17 summarised these desiderata in the following words: “It (Economic Survey) must possess a rare combination of gifts …. No part of man’s nature or his institutions must be entirely outside its regard. It must be purposeful and disinterested in a simultaneous mood, its authors as aloof and incorruptible as artists, yet sometimes as near to earth as politicians.”
The current Economic Survey offers rare insights into the Government’s economic thinking. Right at the beginning, the Economic survey reveals that the present Government has adopted an ‘agile’ approach which essentially means responding to situations as they emerge, while discarding the traditional ‘waterfall’ approach that involved an upfront analysis of the issues at hand, detailed planning and meticulous implementation.
According to the Survey, the ‘waterfall’ approach was not suited to the uncertainties and complexities of present times, while easy availability of real-time data (like GST collections, digital payments, satellite photographs, electricity production, cargo movements etc), enables constant monitoring, making the ‘agile’ approach the best option for Government planning.
Demonetisation could be the first instance, where the Government adopted the ‘agile’ approach, though unknowingly, by issuing 74 notifications in the 50 days till 31 December 2016, as a response to emerging situations. It is quite another matter that some of the notifications were contradictory, and the slew of notifications left the public thoroughly confused. According to the current and last year’s Economic Survey, the ‘agile’ approach was applied for management of the Covid-19 pandemic, which casts some doubt on the efficacy of the ‘agile’ approach.
The first chapter of the Economic Survey “State of the Economy” takes stock of the economy, predicting the path the economy would take in the coming financial year. Much of what the Economic Survey says is unexceptionable and even insightful but gratuitous defence of the Government’s policies and actions, particularly with reference to Covid management, makes the Survey gloss over the Government’s many failures like not ramping up medical infrastructure in the interregnum between the first and second waves of the pandemic.
The usefulness of the Survey would have increased manifold had it studied the inability of the Government to plan adequately for the second wave of the pandemic, as also the failure of field-level operatives to implement emergent measures, like installing oxygen plants in hospitals. Rather, the Survey relies on abstruse phrases like “Barbell strategy,” “Bayesian,” and “Agile” to justify the inadequate response. Also, the Survey lists the various initiatives taken by the Government to prevent distress amongst the poor during Covid times; however, the actual effect of these measures is not enumerated. In a continuation of the first chapter, the second chapter “Fiscal Developments” discusses the fiscal policies of the Government.
The Economic Survey lauds the agile approach of the Government aimed at controlling the pandemic-induced disruptions in Government finances. The chapter faithfully narrates the Government’s fiscal strategy and performance of fiscal parameters in the current and preceding years, followed by a detailed analysis of medium to long-term trends in Central, State and General Government finances. However, the Survey fails to indicate the effect of fiscal policy on Indian society and economy. For example, considerable space is devoted to changes in Income tax and GST procedures but the response of taxpayers and departmental personnel to these changes is missing. Similarly, disinvestment and the National Monetisation Pipeline (NMP) have been extensively discussed but there is no indication in the Survey as to why the Government had to reduce the target for disinvestment from Rs.1,75,000 crore to Rs 78,000 crore or why the NMP lies forgotten after its much-heralded inauguration.
The Economic Survey notes that total debt of the Government had doubled from Rs 58.66 lakh crores in 2014-15 to Rs 117.04 lakh crores in 2020-21, but adds nothing beyond hoping that in future, the Debt-GDP Ratio would follow a downward trajectory. The Economic Survey has done well to recount the measures taken to enhance the efficiency of Government spending and the success of Government e-Marketplace (GeM). A worthwhile suggestion made in the Survey is to selectively discard the Least Cost System (L1) while approving Government tenders.
An entire chapter, “Prices and Inflation,” is devoted to the study of rising prices. The Survey suggests that much of the present inflation is imported by way of high fuel and edible oil prices. Little blame is put on the extortionate Central Government and State Government taxes on petroleum products and the loose monetary policy followed by the Reserve Bank of India. Then, various explanations have been put forward for the phenomenon of double-digit increase in the Wholesale Price Index, even while the Consumer Price Index has risen in single digits.
Since the WPI and CPI are eventually bound to converge, the Survey piously hopes that WPI would come down to the level of CPI, ignoring general experience to the contrary. Last year’s Economic Survey stated: “India was the only country to have undertaken structural reforms on the supply-side at the initial stages of the pandemic. This far-sighted policy response will generate productivity gains in the medium to long term.” The first structural reform mentioned by the Survey was the still-born Farming Acts.
The current Economic Survey devotes an entire chapter to agriculture, which starts by noting that thanks to Government policies, the agricultural sector had a buoyant growth in the last two years. It is felt that the Economic Survey could have been more forthcoming on this issue because agriculture is the neglected child of Indian economy that did well, even during the pandemic, while more privileged sectors went down.
Also, instead of simply narrating facts about the state of agriculture, the Economic Survey should have suggested the way forward after repeal of the Farming Acts, which are, incidentally, not mentioned at all in the Survey. Last year’s Economic Survey had a chapter “Inequality and Growth: Conflict or Convergence?” While pointing out the difference between poverty and inequality, the Survey concluded: “India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie,” which is only a restatement of the trickle-down theory. Significantly, these conclusions were in continuation of the conclusion reached in the first chapter of the Economic Survey 2019-20, “Wealth Creation: The Invisible Hand Supported by the Hand of Trust,” viz. markets must be trusted to let the country develop economically. However, the Oxfam International report, “Inequality Kills: India Supplement 2022,” disproves both the trickle-down theory and the capacity of market forces to reduce poverty.
The Report points out that 4.6 crore Indians fell into extreme poverty in 2020, while the number of Indian billionaires grew from 102 to 143, and the aggregate wealth of India’s 100 richest people increased from Rs.23.1 lakh crore to Rs.57.3 lakh crore. Earlier, too, the “World Inequality Report 2022,” Oxfam International report “Inequality Kills” and the homegrown PRICE Survey pointed to emergence of an unacceptable degree of poverty and inequality in India. In all fairness, the present Economic Survey should have continued the discussion on poverty and inequality, even at the cost of a possible disagreement with earlier Economic Surveys.
The last chapter of the Economic Survey “Tracking Development through Satellite Images & Cartography” is the most interesting. Satellite images and maps of the same place, several years apart, give a first-hand view of the changes in that period. For example, comparison of a satellite image showing night-time luminosity of the country in 2012, and another showing the night-time luminosity in 2021, demonstrates the progress in electrification in this period. Similarly, maps of highways and airports ten years apart, show the progress in transportation infrastructure.
On the whole, the understanding, vision and erudition of the Economic Survey disappoints neither the student nor the seasoned economist. The Survey would, indeed, have been priceless, had it not obscured its perspicacity and scholarship by brevity and circumspection at crucial junctures.
(The writer is a retired Principal Chief Commissioner of Income-Tax)