Economic Survey-II to tone down criticism of RBI

Top decision makers in govt ask CEA to change some of the paragraphs

The tabling of the 2016-17 Economic Survey Part II in Parliament is delayed as top decision makers in the government asked Chief Economic Advisor Arvind Subramanian to tone down the document's criticism of Reserve Bank of India’s (RBI’s) inflation modelling and monetary policy stance, according to informed sources in the government.

When contacted, Subramanian or his team members did not want to comment on the matter.

Part II of the Survey, which has more data and less commentary than the one released on January 31, was expected to be tabled on July 20. It will now be tabled next week. 

One of the “informal’’ reasons being given for the delay was that the translation of the Survey into Hindi was taking time.

However, it has now emerged that the makers of the document — Subramanian and his team — have been told to soften some of the criticism of the RBI. Sources said that the team making the Survey was told to delete some of the passages. “Changes are under process,’’ a source said. But, there is no clarity yet on how different some sections of the Survey are from what Subramanian originally intended. 

It is possible that Subramanian would continue with his disapproval of the Monetary Policy Committee’s  (MPC’s) decision not to cut rates, another source pointed out. 

The Economic Survey may focus on the inflation data over the past year and how the MPC’s inflation targeting has been off the mark on some occasions in its outlook.

Subramanian had reacted strongly to the MPC’s decision to hold repo rates on June 7. “In recent times, seldom have economic conditions and the outlook warranted substantial monetary policy easing.” 

He had said that not only headline prices, but the core inflation rate had declined as well and indicated that the RBI’s “inflation forecast errors have been large and systematically one-sided in overstating inflation”. 

What looked like a rift between North Block and Mint Road played out in the open as RBI Governor Urjit Patel said six members of the MPC had refused to meet government officials for pre-policy meetings. Patel stuck to the time honoured tradition of only the governor coming and meeting the finance minister.

The Economic Survey this year has an altered structure. In previous years, there was a part I with a detailed overview of the economy and outlook for the coming years in the form of commentary. Part II was mostly numbers and data.

The second part of the Survey, scheduled for release next week now, could contain substantial commentary.