This ministerial affiliation was supposed to enable the economist concerned to pool together policy-thinking from across ministries and enable the government to arrive at coordinated thinking on economic policy. The fact that the CEA was located in the all powerful finance ministry gave him, recalls Patel, a level of influence in excess of other economists within the government, including members of the Planning Commission. And those were days when eminent economists were members of the Planning Commission.
For this reason, if not anything else, the annual intellectual output of the CEA, namely the Economic Survey, has come to acquire a certain level of importance in defining the governments thinking on economic policy. The status of the Survey was enhanced whenever independent-minded CEAs opted to write what they felt and used the Survey both as an instrument of advice to their political and bureaucratic bosses and as an indicator to the rest of the world that even when governments did not do the right thing, they were aware of what had to be done.
In the 1990s, the Economic Survey came to be viewed by markets as a signal to what was likely to happen in the budget. This was more on account of the fact that between 1991 and 1996, the finance minister was himself a former CEA. More recently, however, Surveys have reverted to the 1980s mould, when CEA Bimal Jalan wrote what he couldnt convince his finance minister to do!
If former CEA Shankar Acharya had his way, he would have done many things differently and we know this because the language of the Surveys he wrote was so different from the policies his minister of the day pursued.
What can we say about finance minister Jaswant Singhs budget from CEA Ashok Lahiris Survey Surprisingly little, including on the subject of the Kelkar Committee report! Compared to the 38 pages that former CEA Rakesh Mohan took last year to elaborate his views on policy in the first chapter of the Survey (incidentally, other chapters are written by a disparate set of contributors which explains wide variations in style and quality), Dr Lahiri has preferred only 21! Brevity, however, has not contributed to more transparency.
In his first year in office, and perhaps still testing the waters in the finance ministry, Dr Lahiri has preferred to write a rather straightforward account of facts as they are known, offering few opinions. The Survey, therefore, is more a compendium of what has happened than an analytical account of why. As in the Mid Year Review of the Economy (MYRE), Dr Lahiri draws our attention to the strengths and weaknesses in the system and lists out a range of fairly well-recognised policy options.
The one question that bothers me, for which Dr Lahiri provides no answer, is why has there been a deceleration of growth in the Indian economy over the past five years. Amusingly, the Survey offers us a chart on page 17 that shows growth acceleration from 1991 to 1997. Voila! The chart ends there! Nowhere else in the 360-page volume do we get a chart showing us growth trends during 1997-2003! Even Figure 1.3 on page 16 showing decadal averages ends in 1991, as if no one wants to be reminded of what happened in the 1990s!
The central question facing macro-economic analysts and policymakers today is, why has the economy slowed down after two decades of 5.5 per cent growth per annum, half a decade of 6.8 per cent growth per annum, we have just finished a half decade of 5 per cent growth. Gross capital formation is stagnant. Rather than address this question, the Survey derives hope from the acceleration of growth in the industrial sector in the second half of 2002-03 to assert that an 8 per cent growth target, as set in the Tenth Plan (2002-07), is feasible! Of course it is. Incidentally, Maharashtra and Karnataka are among the few states that have logged 8 per cent growth over a decade. So one does not have to seek inspiration from Malaysia and Thailand, as the Survey does. That is not the point. The question is, can the Tenth Plan end with 8 per cent If we have had five years of 5 per cent growth, what explains it
The Survey tells us that this year, growth has revived due to public investment, especially in housing and roads. This has pushed up demand for steel and cement. Can such public investment be sustained without raising revenues Indeed, is public investment warranted How can a government committed to privatisation explain increased public investment as the route to higher growth
The Survey also tells us that this year, growth was hurt by extraneous factors, like the global slowdown, weak monsoons, terrorism, war clouds, and so on. Such factors are beyond the control of the government. If such uncertainty persists next year, and there is no apriori reason to rule that out, how can growth be sustained upwards of 5 per cent
Considering the amount of paper that is used up in printing the Survey and analysing it, the time has come for the CEA to stop publishing this huge 360-page report and produce a smaller version, with about 100 pages of up-to-date data, that is always useful, and about 50 pages of analysis.
Dr Lahiris briefer MYRE (November 2002) was a highly readable document and said more than what his 360-page Survey has been able to say about the state of the economy. Next year, the Survey must ask the real questions about growth, employment, income distribution and productivity that this years Survey, like so many in recent years, doesnt examine. There is no room for growth complacency nor for complacency on employment, merely because theres a current account surplus and forex reserves are upwards of $75 billion!