Column : Chapter 2 makes all the difference

Written by Bibek Debroy | Updated: Jul 3 2009, 08:01am hrs
Why does one read the Economic Survey It is usually an extremely boring and unattractive document. Once upon a time, one used to read it because it was only source of data. Though the Survey has no primary data and everything in it is secondary, for people outside government, it was a primary source. Thats no longer true. Data surfaces outside government and within government; there are regular flows, even within Finance Ministry, such as through monthly reports. Data-utility of the Survey is limited, though people who dont regularly track the economy are sometimes drawn to it because it is an annual pre-budget exercise. Constitutionally, there is no requirement there should be a Survey. An annual statement on the economy before Parliament doesnt have to be Survey and till mid-1960s, there was no Survey.

But beyond data, a Survey can have utility if it produces good analysis. There too, there is external competition. Therefore, one might want to read Survey because it gives us some idea of what the government plans. Since 1991, that has meant reforms. However, the correlation between what the Survey propagates and what Budget perpetuates is weak. One reason why Surveys are boring and unattractive is few Chief Economic Advisers (CEAs) have thought it worth their while spending time on these documents.

While there are indications that the economy may have weathered the worst of the downturn, in part due to the resilience of the economy and also various monetary and fiscal measures initiated during 2008-09, nevertheless, the situation warrants close watch on various economic indicators including the impact of the economic stimulus and developments taking place in the international economy. This is typical of what Surveys dish out and it comes from Chapter 1 of this years Survey. 6.7% in 2008-09 isnt that bad and even with 6.7%, per capita GDP growth was 4.6%. Investment rates havent dropped and deficits had to be widened as counter-cyclical measure. Cushions were provided by social sector initiatives, including NREGS and economy has shock absorbers that will facilitate early revival of growth. Typos may be less (none I could detect in Chapter 1), the language better and the get-up more attractive. But having read these 15 pages of Chapter 1, the boredom hypothesis was vindicated. Typically, the Surveys first chapter has an issues and priorities section. It is only when one looks for this missing section that one appreciates the difference Arvind Virmani has made to the Survey. Chapter 2, which is what issues and priorities has now become, is one of the best Survey chapters I have ever read.

A column doesnt allow one to encapsulate everything in the Survey. However, Box 2.1 on policy options for reversing slowdown should be flagged, and also graphs on inter-State performance. Some of this draws on Arvinds own research. A question follows. Do CEAs have time for research, without which, such value additions to the Survey arent possible Perversely, did the interregnum in the Finance Ministry actually make for a better Survey

The media will certainly latch on to big bang reform intentions made in Boxes 2.3 (fiscal sustainability and tax simplification), 2.4 (financial markets), 2.5 (energy dependence or independence), 2.6 (improving the investment environment), 2.7 (public goods and institutional reforms) and 2.8 (education and employment generation). I am not even sure these are government intentions, these are Virmani intentions. Any deduction that such reforms will follow (including privatisation) is premature. However, elimination of surcharges and cesses may happen. Expectations shouldnt be jacked up for the imminent budget. Consider whats happened (actually not happened) to Kapil Sibals plans for education reform, administered price mechanism (APM) for petroleum products, and the upping of poverty line by Rural Development Ministry. These straws in the wind dont augur well for the future.

Here is what the Survey has to say on education. Education in India comes under the concurrent list and thus both the Central and State Governments are involved leading to multiple controls and regulations by the governments and statutory bodies. There is an urgent need for replacement of bureaucratic controls in education by professional regulators along with private-public partnership to ensure universal primary education. Competition in tertiary and secondary education is also equally essential. Rating the quality of educational institutions and all education service providers (private and public) may be helpful. Entry of registered societies (non-profit) and publicly listed (education) companies in all fields of education, subject to the regulatory framework which ensures quality and reasonable pricing may be encouraged....Besides, the number of institutions could be increased through entry of private players while ensuring that they are professionally regulated so that their curriculums/degrees are internationally accepted.

Sam Pitroda and Kapil Sibal will approve. But that doesnt mean this is on the governments wish-list. The Survey has vastly improved. But that doesnt mean Indias economic governance is about to improve. Let me finish by taking back what I said first. The Survey is no longer a boring and unattractive document.

The author is a noted economist