Bibek Debroy: Economic Non-Survey

OFF THE RECORD

By an unhappy coincidence, this column appears the day newspapers report Economic Survey 2005-06, although it was written earlier, without any idea of what the Survey might contain. But that's not quite true. The Survey is so predictable, even Chapter 1. At best, the issues and priorities segment of Chapter 1 will reflect some aspects of reform that are going to receive emphasis. The core reform agenda has been unchanged for several years, since reforms haven't taken place. First, the Survey will go gaga over GDP growth figures, 8.5% in 2003-04, 7.5% in 2004-05, and 8.1% in 2005-06. With the exception of China at 9.5%, we will be told that India is one of the fastest-growing economies in the world. There may even be a sneak preview of NSS large sample data for 2004-05. In that case, we will know that the all-India poverty ratio is down from 26% in 1999-2000 to something like 21%. There will be gloating over a savings rate of something like 29% and an investment rate of something like 31%, with great emphasis on improved public savings. We will be told that industry and manufacturing are doing well (the latter more true than the former). Scope to mention the National Manufacturing Competitiveness Council (NMCC) and its strategy paper. So are services.

Of course, there are concerns about agriculture, especially if we mean agriculture rather than agriculture and allied activities. But after having flogged to death the need for agro reforms and flagged the trend growth rate of 2%, the Survey will harp on agro growth for 2005-06, which should be more than 3%. We will have good news on inflation at 4.5% (the 4.2% figure will be too late for the Survey) and how this has been contained despite the hike in global crude oil prices. Exports are growing at 25% plus in dollar terms, the rupee is appreciating against the dollar, we have 140 billion US dollars plus of reserves. Time to mention external debt and improved debt indicators. The trade deficit has increased. But this is a good thing, because non-oil imports have also increased and this indicates recovery in manufacturing and investments. Ditto for the current account deficit. When we had a current account surplus till 2004-05, the Survey thought that was a good thing. Now that we have a current account deficit, the Survey will say that is exactly what should happen in a capital-scarce country. Bring in net invisibles, capital account inflows. FDI inflow may actually have crossed 6 billion US dollars in calendar year 2006. Throw in A T Kearney and Unctad, both pointing out how attractive an investment destination India is. Throw in India's improvement in the Global Competitiveness Report (GCR) and the World Bank's Doing Business in India. Throw in the new SEZ policy and FDI liberalisation in radio, telecom, news, power and petroleum infrastructure and asset reconstruction companies.

Next, one has to bring in Bharat Nirman and the National Rural Employment Guarantee Act. The only way to do this is by bringing in the organised versus unorganised sector dichotomy and stagnating employment in the rural sector. There is no harm in the Survey mentioning labour market reforms, is there? After all, the Survey has been harping on the Industrial Disputes Act for quite some time. One can now bring in several reports that have highlighted the skill-shortage problem that India faces, particularly in some parts of the country. Hence, the government is doing wonderful things on public/private partnerships in ITIs. But there is an additional problem in rural areas. So let us justify Bharat Nirman and the National Rural Employment Guarantee scheme, bring in the 200 backward districts. Perhaps one even brings in pension reforms and lack of social security in the unorganised sector, since authors of the Survey have some sense of whether the Budget will have a labour cess to fund social security in the unorganised sector. I doubt the Sixth Pay Commission will be mentioned. But concerns will be expressed about the FRBM (Fiscal Responsibility and Budget Management) Act. You can't get from a 2.7% revenue deficit to GDP ratio in 2005-06 to 0% in 2008-09. However, credit will be taken for a drop in the overall (Centre plus state) fiscal deficit to GDP ratio.

Given the NCMP (National Common Minimum Programme) thrust, there will be talk of increasing health and education public expenditure as share of GDP. More credit taken for children getting enrolled in school, although this may have little to do with the Sarva Shiksha Abhiyan (SSA). But, if there are going to be more cesses, the education cess has to be justified. Not that there will be anything much on efficiency of public expenditure, except the Right to Information Act, decentralisation and rationalisation of centrally sponsored schemes (CSSs). Plus the mandatory reference to fertiliser, food, petroleum and power subsidies. After all, barring precise numbers (which outsiders don't have access to before Survey), everyone knows what the issues are. There was a time when no economic surveys existed outside the government system. Now, there are several. That is largely the reason, apart from being unattractively produced and written, why the Survey has become a bore.