In its January review of the monetary policy, the Reserve Bank of India surprised many by raising banks’ cash reserve ratio, or the portion of deposits that commercial banks are required to keep with the central bank, by three-fourths of a percentage point, a quarter percentage point more than what the markets had expected. But to me, the real surprise was the brevity of the policy document. It contained all the necessary ingredients previous quarterly reviews had and yet its length was only 4,171 words, spread over 271 lines and 113 paragraphs. The October review had 19,873 words (2,513 lines and 879 paragraphs) and the July review 10,394 words (1,759 lines and 825 paragraphs). The annual policy document in April had 27,852 words (3,468 lines and 1,111 paragraphs).
There were only three graphs and charts in the January document. One does not need too many graphs and too lengthy a policy document because the book on “macroeconomic and monetary developments”, released a day ahead of the review, tells all and there is no point in repeating it.
I would expect the language—if not the length—of the Economic Survey, the finance ministry’s report card on the economy released ahead of the Budget, too, to change with a new chief economic adviser to the finance minister around. Unlike his predecessors, Kaushik Basu is not a macroeconomist and that may help him see things in a different light and redraft at least some chapters of the survey to make them more interesting and less verbose. By tradition, most of the chapters of the survey are templates where the figures get changed but everything else remains the same.
Do I sound uncharitable to the painstaking exercise taken up by the economic wing of the finance ministry? Take a look at some of the samples:
On “poverty and inclusive growth”, the economic surveys of the past two years had almost identical 300 words—“Incidence of poverty is estimated by the Planning Commission on the basis of the large sample surveys on household consumer expenditure conducted by the National Sample Survey Organisation (NSSO) on a quinquennial basis. The uniform recall period consumption distribution data of NSS 61st round places the poverty ratio at 28.3% in rural, 25.7% in urban areas and 27.5% for the country as a whole in 2004-05. The corresponding poverty ratios from the mixed recall period consumption distribution data are 21.8% for rural areas, 21.7% for urban areas and 21.8% for the country as a whole. While the former consumption data uses 30-day recall/reference period for all items of consumption, the latter uses 365-day recall/reference period for five infrequently purchased non-food items...”
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Similarly, while dealing with “aggregate demand”, the first chapter of both the surveys—“State of the economy”—comes to the same conclusion, in an identical sentence: “The most important contribution to demand growth has come from investment, while the external trade made negligible or negative contribution.”
The same cut and paste exercise is visible in the survey’s analysis of current account (“The current account, after being in surplus during 2001-02 to 2003-04, reverted to a deficit in 2004-05. This was despite a robust growth in net invisibles account fuelled by software exports and private transfers. ...thus large merchandise trade deficit coexists with a lower deficit on the goods and services account because of the surplus on non-factor services.”) and external sector developments (“A widening of merchandise trade was one way in which foreign savings could be absorbed and growth in exports and imports was a key component of the growth process.”).
In some cases, however, the writers of the survey take pains to make minor changes. For instance, the 2007-08 survey has this to say on the power supply position: “Out of the total installed generating capacity in the country, about 10.5% is based on gas or liquid fuel (excluding diesel). The supply of gas to power stations that use gas as the primary fuel remains inadequate.” The next year’s survey makes a slight change and says, “Out of the total installed generating capacity in the country, about 10.0% is based on gas or liquid fuel (excluding diesel). The supply of gas to power stations that use gas as the primary fuel remains inadequate.”
Similarly, on food products, the 2007-08 survey says, “As per the IIP data, food products grew at 6.8% during April-November 2007 compared to 2.5% during April-November 2006. This has been largely due to the phenomenal growth of 57.9% in the production of sugar, which has the highest weight in the ‘food product’ group.”
The next year it is changed to “As per the IIP data, the index of production of food products declined by 9.6% in 2008-09 compared to a growth of 7.0% the previous year. This has been largely due to steep decline in the production of sugar, which has the highest weight in the ‘food product’ group.” IIP is short for the index of industrial production.
Basu’s first week in North Block was harrowing as his in tray reached for the ceiling until someone pointed out that on his right was an out tray. I am sure that he can afford to drop some of the pages of the survey in the out tray and give it a contemporary look and feel with fresh ideas and language.
Apart from being a report card on the economy, the survey also looks ahead. It’s the chief economist’s vision and the government, as a former finance minister puts it, treats this part as a “trial balloon”. If they get public acceptance, it is easier for the government to take a call on such a vision. Basu may well float some trial balloons too on economic reforms.
Tamal Bandyopadhyay keeps a close eye on all things banking from his perch as Mint’s deputy managing editor in Mumbai. Comment at email@example.com