No self-congratulation

Economic Survey wrestles with growth impact of pandemic

The Economic Survey for 2021-22 has been tabled in Parliament, in a format somewhat different from previous years. The two volumes of previous Economic Surveys have become a single volume, with almost all of its chapters dedicated to sectoral issues. There is also a statistical appendix published in a separate volume. The principal economic advisor to the Government of India, Sanjeev Sanyal, has written in his preface that this alteration allows for a more integrated approach to the subject matter, and that earlier the two volumes were not “adequately linked”. Mr Sanyal is not wrong in this criticism. Yet it is important to note that much of what was of utility and interest in previous years’ Surveys emerged precisely from those chapters that were not clearly linked to the data assembled or sectors analysed. They revealed thinking in government about issues as wide-ranging as welfare mechanisms, urbanisation, and constraints on private investment.

Other than its indications for the state of government thinking on economic policy issues, Economic Surveys are usually of interest because of the predictions they make about growth and investment prospects in coming years on the basis of the data available with them. While these are not necessarily the same as the assumptions baked into the Union Budget, which is presented the next day, they are nevertheless of considerable interest. This Economic Survey has argued that the Indian economy is in a good position to witness real gross domestic product growth of 8.0-8.5 per cent in the coming year, after posting 8.8 per cent in 2021-22, but following a fall of 6.6 per cent —according to the first revised estimate, out on Monday evening — in the first pandemic year of 2020-21.
 

These figures are broadly credible. The Survey is also right to reveal that India is finally emerging, in quantitative terms, from the shadow of the pandemic period and is reaching pre-pandemic levels of output. Yet this is the least that can be expected, and not grounds for self-congratulation. The Survey does argue that, when the International Monetary Fund’s (IMF’s) estimate of 7.1 per cent growth for India in 2023 is included, India is the fastest-growing major economy in the world over three years. Yet this is not exactly reassuring, as India’s sharp contraction in the first pandemic year means that, again according to the IMF figures, over the four years since 2020 it would not be a particularly outstanding performer among emerging Asian economies. If anything, the expectations from 2021-24 suggest that India’s recovery is less sharp and from a deeper hole than its comparator nations. 

The only other big takeaway from the Economic Survey is its defence of the government’s pandemic response, which it says has been “agile” — in that it did not have a pre-assessed set of interventions but used high-frequency data to judge when and how it should intervene. This is indeed how policy should have been set. But critics would argue that the response was in fact determined by the government’s inability to do anything other than it did because of the failures of India’s welfare system, and its own tight fiscal position. If anything, the claim of “agility” sounds like making a virtue of necessity.