The Economic Survey is meant to be an independent exercise by the Chief Economic Advisor (CEA) to assess where the economy stands and to explore different ways forward. Under the Modi government, Chief Economic Advisors have rightfully been criticised for going off on their pet tangents. The 2020 Economic Survey sticks to this pattern. CEA Krishnamurthy Subramanian takes off on the topic of wealth creation when India is facing some of the worst economic indicators in decades.
Is this callousness, or just a tacit admission that this government and its advisors have absolutely no credible solutions to India’s persistent economic crisis?
The reality of the Indian economy is: India has the worst economy in 42 years. Unemployment is at a historic high. For the first time in four decades consumption has fallen, raising fears of increasing poverty and malnutrition. Revenues are drying up drastically. Disinvestment targets have been missed by a mile. The government has now resorted to spending slowdowns and delays in transferring the states’ share in the GST. Our soldiers have to operate in Siachen without adequate equipment and requisite food. Yet, the Economy Survey will not tell you this. The entire exercise seems designed to obfuscate rather than educate.
No ‘Hand of Trust’ Can Help Trust Deficit
The Survey speaks of the “Hand of Trust”. This is rich coming from a government which has unleashed tax terrorism on entrepreneurs. The suicide of the Coffee Day founder is one tragic outcome. A handful of India’s leading industrialists have had the guts to question the government while the vast majority cower in fear of one agency or the other being unleashed on them.
The trust deficit is so high that there is hardly anyone making investments.
A mega corporate tax cut has only helped the stock market climb to new highs disconnected from the underlying economy. The Finance Minister made a grand announcement of a Rs. 100 lakh crore National Infrastructure Pipeline, that includes substantial contributions from the private sector. The reality suggests that this should actually be renamed the National Infrastructure Pipedream.
The lack of trust extends to the numbers the government puts out. India’s reputation for quality data has been shredded by the Modi government’s quest for favourable optics.
While releasing the Survey, the CEA assured the audience that India would reach a $5 trillion economy by 2024, which would require real GDP of 9 percent+. He went on to peg GDP growth for the next year at 6-6.5 per cent. Let us here recall that last year, the Survey had predicted GDP growth rate at 7 per cent. The government has missed that target by more than 200 basis points. Perhaps the CEA took to heart Commerce Minister Piyush Goyal’s Einsteinian wisdom that mathematics does not matter.
How this ‘Survey’ Glosses Over Reality
The CAG, independent experts, and former Finance Secretary have all pointed how the fiscal deficit is substantially higher than the headline number. The Survey prescribes not paying undue attention to the fiscal deficit breaching the limits under the Fiscal Responsibility and Budget Management Act, 2003. This Survey certainly prepares the defence and ground for higher fiscal slippage in the budget
The starkest admission of failure is shifting the ‘Make in India’ goalpost. After spending huge sums and achieving zero results, the new slogan offered by the CEA is ‘Assemble in India’. We desperately need impactful reforms, not just reformed slogans and downgraded aspirations. Given that the Commerce ministry is reportedly planning to increase a range of tariffs, we may not even get closer to this lowered ambition.
This Survey is unique in that it completely glosses over the reality. For all the emphasis on wealth creation, the CEA’s inattention to distribution and inequality is totally objectionable. India has consistently been falling in the Global Hunger Index. The leaked (and trashed by the government because of its alarmingly negative insights) NSS Consumption Survey pointed how—for the first time in four decades—food consumption had reduced, meaning poverty and malnutrition had increased, reversing decades of effort. Food inflation is at a 5-year high. Yet, somehow, the Survey wants us to believe that thalis have become affordable. If this is the economic analysis the government relies upon, the aam aadmi’s thali will soon be khali.
The Economic Survey Gives No Credible Recommendations
It is amply clear that we are amidst a demand slump. Our policies should focus on raising consumption. Yet, the Economic Survey has no credible recommendations to deal with the demand slump. Our immediate concern should be to raise the incomes of farmers, agricultural labour, urban poor, and the middle class. Like the Modi government, the Economic Survey chooses to completely ignore the concerns of these sections.
The monumental mismanagement by the Modi Government has pushed India to a brink of a recession. The challenge before the Indian economy is how to deal with the Modi Legacy. The legacy of demonetisation; the legacy of a hastily implemented GST which wreaked havoc on micro, small and medium enterprises; the legacy of being India’s first job-loss government; the legacy of pushing the banking sector into turmoil; the legacy of turning our demographic dividend into a disaster.
Instead of focusing in depth on the mega crisis facing India’s financial sector, the Survey talks about sub-scale banks as compared to the size of the economy.
The truth is that the government’s priorities regarding public sector banks have been misplaced. At a time when banks should have focused on investment and boosting credit growth, they have instead been burdened to deal with uncomfortable mergers. So NPAs continue to go up and credit growth has crashed.
The Survey talks about more sales of homes to clean up banks and NBFC balance sheets. It is ironical and disconnected from reality because at a time when consumption has crashed, to suggest people should buy houses is foolhardy. In sum, if the Economic Survey was sincere in being a policy-relevant document, we would have conversations and credible solutions to our problems. Instead, we are left with thalinomics. For the sake of India, let us hope the budget does better than the Economic Survey.
(Prof. M. V. Rajeev Gowda is a Congress Member of Parliament. He tweets @rajeevgowda. This is an opinion piece, and the views expressed are personal. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)
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