Economic Survey advocates further ‘economic freedom’

| Updated on January 31, 2020

While it does makes a case for further reform, it falls short on prescriptions and sector-specific insights

A stand-out feature of the Economic Survey 2019-20 is its accent on micro-economic solutions — and not public finance — to problems of the day. It suggests a return to the Modi government’s original slogan of ‘minimum government, maximum governance’, at a time when sections of the industry have expressed discomfiture over ‘tax terrorism’. The Survey’s broad theme, wrapped around the idea of free markets, is that easing up constraints in setting up a business — the Survey informs that setting up a restaurant is more difficult than buying a gun — will go a long way to spur the economy. It cites in detail the logistics constraints faced by electronics, carpets and apparel exports. It is hoped that the Survey’s message of furthering ‘economic freedom’ is implemented by the Centre in all seriousness.

However, the Survey is short on detail in terms of the credit constraints faced by small units, even as it regards entrepreneurship as the key driver of the economy. Wealth creation, à la Ayn Rand or Horatio Alger’s rags-to-riches stories, calls for ‘equality of opportunity’ as spelt out by the Survey, but this pre-requisite could have been elaborated upon — in other words, providing universal access to education and skill development, as well as the development of financial markets in a manner that allows equal access, irrespective of background. The Survey also makes a useful suggestion when it says that assets slated for disinvestment can be parked into a separate entity, like Singapore’s Temasek Holdings, so that sales can be made at the right time. It has, however, underplayed the present slowdown, making an optimistic growth projection of 6-6.5 per cent for 2020-21. Besides advocating strategic sales for the benefits that are expected to accrue to the entity, it does not point to any public finance path to steer the economy. As for Make in India, it builds on themes raised in earlier Surveys such as focussing on labour-intensive products, adding that network items used in the electronics and computer sectors hold potential; these expand the scope to ‘Assemble in India’, which is a more realistic stance than expecting global businesses to move manufacturing to India.

However, an institutional framework is missing, as a result of which subjects such science and technology, climate change and higher education do not get the space they deserve. The role of capital markets in propelling an economy has been viewed in rather linear, simplistic terms. The dynamic challenge of regulating markets in the consumer interest, an ever-present problem in our times, has been overlooked. The Survey could have examined the performance of key policies such as affordable housing, corporate tax cuts, Fasal Bima and PM-Kisan. On the whole, it is overcautious.

Published on January 31, 2020

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