The Economic Survey was tabled in the Parliament today and its key themes all rung the right notes. It said all that we wanted to hear – employment, agriculture growth, water conservation, investments, exports.
It says all the right things but what does it mean to you and me apart from a “feel good” factor? Realistically speaking, not much. The Survey is basically an economic synopsis of the year gone by – something like taking stock of the accounts of previous year before we embark on the accounts for the next year.
The Survey basically lets us know how the economy fared in the year gone by and to some extent, gives us possible policy actions required in the Budget, pertaining mainly to Govt finances, external trade, fiscal deficit; major macro-economic data.
This document is an annual statement which is put together by the Finance Ministry of India, showcasing the economic development during the course of the year. The draft of the survey is prepared by Department of Economic Affairs and cleared by Chief economic Advisor and the secretary Economic Affairs. The final version is vetted by Finance secretary and Finance Minister. The Union Budget is a statement for the future while the Economic Survey is a statement of the past fiscal.
The Survey perceives FY20 GDP at 7%, which is not like a jump to the sky when the GDP for FY19 is at 6.8%. So it is realistic to that extent, also taking into account the fact that there are only three quarters to achieve this target. The assumption is that political stability will aid pushing up the demand and that is what will lead to growth. Interestingly, this 7% is exactly what the RBI has estimated for FY20.
The FY19 fiscal deficit estimate has been retained at 3.4% of GDP, the same as projected in the interim Budget presented on February 1.
The good part about this Survey is that it is not merely talking in the wind. It seems to be rooted, taking into account the current reality. It has rightly said that the investment is what will get the economy into the “virtuous cycle”. But this is exactly what was proposed in the 2018 Survey too and we see how that advice went. Hopefully now with the election won, the Govt will present tomorrow a plan to spur new investments or else this “virtuous cycle” will turn into a more “vicious cycle.”
And the Survey lays down the tenets of investments by stating that it should support demand, create capacity, increase labor productivity, introduce new technology, allow creative destruction and generate jobs. The Survey has laid emphasis on how exports should become an integral part of this growth model.
More significantly, the Survey stresses the need to create a climate of trust between the private sector and the Govt. It has also touched down upon the need to increase the retirement age in a phased manner and construct infrastructure for healthcare. And it has rightly said that the states need to concentrate on merging schools and making them viable instead of opening new ones. The Chief Economic Adviser, KV Subramanian has proposed minimum wages to all employees and workers to ensure
All in all, as we said earlier, the Survey is rooted but the suggestions sound more Utopian; in an ideal world, this is the vision which our country should have, following the path chalked by the Survey. But then we do not live in an ideal world….