The Hindu Business Line : Survey ‘janaaha sukhino bhavantu’?

How soon will the bad times end? The Economic Survey says the economy has only slowed, not shrunk, and we are generally better off than other countries, writes T. C. A. SRINIVASA-RAGHAVAN.

Every government economist has a dream, that one day he or she will be able to supervise and write the Economic Survey. The job goes with the turf if you are the Chief Economic Advisor (CEA).

Over the years India has had some excellent CEAs. Arvind Virmani is the latest of them. Sadly, his term has ended and, if all goes well, he may become a deputy governor of the RBI, in place of Dr Rakesh Mohan.

Before he leaves the Finance Ministry, however, he has had one final chance to hoist his last dhobi-list of reforms on us via this year’s Economic Survey. And he has done a fine job of it. Clearly, the slog-over mentality helps in focusing the minds of even economists, for whom, otherwise, caution is a way of life.

Both as a document of record and as a speller-out of ideas, it excels. Chapter 2, in particular, which deals the problems and the prospects before the Indian economy, is about as good as it gets. It gives clear and precise answers.

The key question that everyone is asking is: How soon will the bad times end? The Survey says, in mild reassurance, that the economy has only slowed, not shrunk. So we are generally ok compared to the rest of the world.

But that said, it goes on to note that how quickly the economy accelerates once again will depend on two things: the US economy and the speed with which our politicians agree to reform the economy. The former is not in our hands so the Survey resists the temptation to dwell on it for too long.

Instead, it flows seamlessly into what all we need to do. The list is long, the woods are lovely, and there is a long way to go before the UPA-II sleeps.

It is futile to discuss the hundreds of things the Government needs to do because in many areas we are so messed up that it will take another decade and half to get things right. But there are three areas to which it is worth drawing attention because the Survey either obfuscates or ignores them entirely.

Fiscal deficit

First, there is the Government’s view of fiscal deficits; second, there is the issue of the government’s ability to get things done; and third, there is the entire range of issues relating to agriculture and therefore the prices faced by the people at large.

Take fiscal deficits first. Dr Virmani says we need to get back to the FRBM Act targets as soon as possible. Analytically, there are two elements in this desire. One is the speed with which India gets back to the 3.5 per cent fiscal deficit target; the other is the value of the target itself.

It seems reasonable to assume that no country in the world is in a hurry to get back to low fiscal deficits, India least of all. After all, government spending, especially in a developing and democratic country, is a political process, not an economic imperative.

That leaves the other question: what is so sacrosanct about 3.5 per cent? Why can’t we have a 6 per cent target so that everyone has room to breathe in? It would have been good to have a discussion of the relative merits of the deficit targets.

Next, take the issue of government competence. When all the reports are written, and all the recommendations accepted, and the legislative changes made, there will still remain that uncomfortable question: does the Government have enough employees of adequate competence?

Even if it does, can it guarantee that it will not — as a former RBI governor once said — convert race-horses into donkeys?

Governance bottlenecks

The short point is that this Survey, which has discussed all manner of things, has not mentioned governance as the key bottleneck. That is just ostrich-like behaviour because if institutions matter, capability within the government matters more than anything else.

Finally, there is agriculture. Twist and turn as you will, India’s spectacular failure stubbornly remains in view: 60 per cent of Indians depend on agriculture whose share in GDP is now down to less than 20 per cent.

The Survey’s chapter has a lot of the usual guff but it has missed the absolutely central issue, the sub-division and fragmentation of holdings. This is the problem to be fixed and this is the one problem which is not engaging anyone’s attention, not even Dr Virmani’s.

Should he join the RBI, I would like to draw his attention to the Samar Sen Committee report of 1986 or 1987 on how to take the Green Revolution to Eastern India. In it, Dr Sen (whose son Abhijit is now a Member of the Planning Commission in charge of agriculture) had suggested that India’s property succession laws needed review.

I cite this example only because over the years the Survey has become a colourless document with which even the finance minister doesn’t bother. But unless tricky issues such as succession laws, for example, are discussed, it will remain so — Dr Virmani’s valiant efforts notwithstanding.

( blfeedback@thehindu.co.in)

More Stories on : Economy | Economic Survey | T.C.A. Srinivasa-Raghavan

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page