After the 2009-10 economic survey, which projected economic growth on the dot for 2010-11, most surveys in succeeding years have been off track in predicting growth. Surprisingly, the only other exception was the survey of 2015-16 that pegged economic growth in a range of 7-7.75 per cent for 2016-17 and actual growth was indeed 7.1 per cent. The growth fell in the range predicted by the survey despite the year witnessing demonetisation. The major setback in terms of prediction could be the survey of 2010-11, which had forecast growth to be nine per cent for 2011-12 (plus or minus 0.25 per cent) but growth fell down to just 6.5 per cent. Nine per cent growth has remained wishful thinking in recent times even after the change in the GDP computation methodology, which many say overestimates the growth.
Let us now see the focus of the four surveys presented under the Modi government, three of which were authored by Chief Economic Advisor (CEA) Arvind Subramanian's team. The first one was authored by a team led by another Arvind -- then economic affairs secretary Arvind Mayaram.
The Economic Survey, 2013-14:
The 2013-14 survey focused on reviving investment. It said this required a three-pronged approach that worked through improving India's long-term growth prospects. This strategy was to work through ensuring low inflation by putting in place a framework for monetary policy, fiscal consolidation, and food market reforms. It called for tax reforms through goods and services tax (GST) and direct taxes code. While GST came over three years later, direct taxes code was shelved a year after. Only in 2017, the government appointed a committee under Central Board of Direct Taxes member Arbind Modi to redraft direct taxes.
The Economic Survey, 2014-15:
This was the first survey under Subramanian. Taking inspiration from the International Monetary Fund's World Economic Outlook, this Survey departed structurally from its predecessors and was presented in two volumes. Volume one discussed the outlook and prospects as well as a number of analytical chapters addressing topical policy concerns. Volume two described recent developments in all the major sectors of the economy and contained all the statistical tables and data. In a sense, volume one was forward-looking but gained from the perspective provided by the recent past, which was the subject of volume two. The survey focused on the trinity of Jan Dhan, Aadhaar, and Mobile (JAM).
The Economic Survey, 2015-16:
The 2015-16 survey talked of creating a more competitive environment by addressing the exit (Chakravyuha
) problem, which bedevils the Indian economy and endures as an impediment to investment, efficiency, job creation, and growth. The government later enacted the Insolvency and Bankruptcy Code of India and over 300 insolvent companies, including 12 cases referred by banks under the guidance of the Reserve Bank of India (RBI), are in various stages of restructuring. Rules on bankruptcy are yet to be notified to deal with individual and non-corporate cases. The survey also talked about major investments in people -- their health and education -- to reap the demographic dividend.
The Economic Survey, 2016-17:
The 2016-17 survey segregated the time of presenting volume one and volume two. Volume one was presented in February, after the government announced demonetisation in October 2016. Volume two was presented in August, a month after the GST was introduced.
The first volume talked of doing full justice to demonetisation and then proposed GST, or else it risked being "Hamlet without the Prince of Denmark". It said that while analysing demonetisation was complex, one could definitely say that there were short-term costs; however, there were also potential long-term benefits. Appropriate action, it suggested, could help minimise the former while maximising the latter. The survey also discussed the idea of Universal Basic Income, which still remains in the conceptual stage.
Volume two said there remained both anxiety and optimism in the economy. Optimism stemmed from the launch of GST, the decision in principle to privatise Air India, actions to address the twin balance sheet (TBS) challenge, and growing confidence that macro-economic stability has become entrenched. Anxiety reigned because a series of deflationary impulses were weighing on an economy yet to gather its full momentum and still away from its potential. Anxiety, it said, included agrarian stress (as non-cereal food prices have declined), farm loan waivers and the fiscal tightening they would entail, and declining profitability in the power and telecommunication sectors (further exacerbating the twin balance sheet problems). Agrarian stress still prevails and it will be interesting to watch how the coming survey deals with it. It also talked of real policy interest rates being high, striking a discordant note with the RBI.