The annual birds’ eye view of the economy strongly emphasized the need for the government to loosen its purse strings to aid the recovery without getting overly concerned about the fiscal deficit.
It estimated that the stringent lockdown had flattened the curve and shielded over 37 lakh Indians from contracting the highly contagious coronavirus, apart from saving over one lakh lives.
In a strongly worded attack on credit rating agencies, it said India’s sovereign credit ratings had consistently been much lower than what the fundamentals and its debt situation would merit. “India’s fiscal policy, therefore, must not remain beholden to a noisy/biased measure and should instead reflect Gurudev Rabindranath Thakur’s sentiment of a mind without fear,” the survey said.
The survey compared data from countries and across Indian states to argue that the primary focus at India’s stage of development must be on promoting economic growth rather than reducing inequality. Growth, it said, had a “far greater effect on poverty alleviation than inequality” while adding that “redistribution is only possible in a developing economy if the size of the economic pie grows”.
Not unexpectedly, the survey set out a passionate defence of the new farm laws, asserting that they seek to give farmers a freedom of choice that they have been denied thus far. It also set out a timeline of “consultations/recommendations” dating back to 2001 in an attempt to counter the charge that they had been passed in haste.
The survey called for regulation of healthcare to address the “market failure” in the sector. Urging governments, in particular states, to step up public spending on health to 2.5% of GDP to reduce out-of-pocket expenditure by patients’ families, it also called for a quality assessment framework, citing the UK’s Quality and Assessment Framework as a possible model.
In a separate chapter specifically on the PMJAY (Ayushman Bharat) scheme, the survey, whose lead author is the finance ministry’s chief economic adviser, Krishnamurthy V Subramanian, said comparisons between states that had adopted the scheme and those that hadn’t showed clearly that the scheme had led to improved health outcomes across a range of parameters.
While calling for regulation of the health sector, the survey maintained that overall the Indian economy had been adversely affected by too much regulation. Complex regulation that aimed to anticipate every possible situation rather than light supervision was the bane of India, it asserted.
The survey cautioned about the elevated stock prices. “While stock markets value the potential future growth, these elevated levels still raise concerns on the disconnect between the financial markets and real sector,” it said.
The two volumes of the nearly 900-page survey had a smattering of references from cricket (India’s 36 all out and the subsequent V shape recovery in Australia), Bollywood (Amitabh Bachhan starrer Main Azad Hoon) and ancient wisdom scattered over a wealth of charts and graphs that sought to drive home each point with data.
Observing that the “regulatory forebearance” — relaxed regulations on banks classification of stressed loans – introduced in the wake of the 2008 global financial crisis had been allowed to continue for too long, it cautioned that the same mistake should not be repeated again. The relaxation of norms for non-performing assets (NPAs) was a valid response to a crisis but had been turned into a “staple diet” well after the crisis ended, it noted. That, it said, had led to questionable loans by banks and reckless investments by borrowers.
Proposing a “bare necessities index” to map how states were placed in terms of access to fundamental needs like drinking water, sanitation and housing, the survey said that data from the National Statistical Organisation showed that all states had made progress on these fronts between 2012 and 2018. Also, states that were worse off had made greater progress thereby closing the gap with the others. Similarly, the poor had gained more than the rich. Focussing on these basic needs, it pointed out, also improves health and educational outcomes.
One of the few areas in which the survey expressed concern at India’s performance was inadequate R&D spending, in comparison with other large economies. Even the limited R&D spending and allocation of resources was thanks largely to the public sector with Indian businesses not pulling their weight, it pointed out. “This points to the need for India’s business sector to significantly ramp up investments in R&D,” the survey stressed, saying “India’s aspiration must be to compete on innovation with the top ten economies”.