Photo: Mint
Photo: Mint

Opinion | Two different reports but with similar action replays

The two reports fail to provide new insights in their coverage of different sectors and what is required

As the year-end draws near, two studies have been released, independent of each other, but both wishing to improve India’s economy. The first is titled “An Economic Strategy for India" and is authored jointly by a group of 13 economists, including former Reserve Bank of India governor Raghuram Rajan, Ford International professor of economics at Massachusetts Institute of Technology Abhijit Banerjee and chief economist for the International Monetary Fund Gita Gopinath. A few days later, the government’s think tank Niti Aayog released its report called “Strategy for New India@75".

While Niti Aayog’s document has a target date in mind—2022, when India celebrates 75 years of independence—for achieving some of its objectives, the Group of 13 has no well-defined time frame or absolute targets. For example, Niti Aayog wants to increase the real economy’s size from $2.7 trillion in 2017-18 to $4 trillion by 2022, which assumes a growth rate of over 9% every year. In addition, Niti Aayog wants investment rate to go up from the current 29% of gross domestic product (GDP) to 36%, and exports of goods and services to rise from $478 billion to $800 billion.

The Group of 13, on the other hand, has supplemented the main document with 12 individual notes on agriculture, environment, healthcare, labour reforms, infrastructure, financial sector development and reforms, de-risking the external sector, growth with fiscal prudence, exports, education reforms, anti-poverty policies and banking reforms.

What is interesting about the two documents is the timing of the release: Just after the five crucial state elections, just before the year-end and just before campaigning begins for general elections in April 2019.

The Niti Aayog document, despite its volume, has few fresh insights to offer; its avowed character is economic but its motives verge on the political. Apart from panegyrics for Prime Minister Narendra Modi and not-so-subtle attempts to blame most current ills on a government that demitted office over four years ago, there is very little this document has to offer by way of novel ideas and concepts or policy prescriptions. It might, at a stretch, even serve as an input for the ruling party’s manifesto when general elections roll around.

Here’s an example. The unilateral action of demonetization was unarguably a disastrous economic policy action, as anecdotal evidence and data have by now conclusively demonstrated. The misadventure may have yielded short-term political dividends (such as seats in the 2017 Uttar Pradesh assembly elections) but has left economic scars that will take some time to fully heal. Yet the Niti Aayog document chooses to gloss over this policy misstep in the most partisan fashion. Instead of focusing on the deleterious impact of demonetization on agriculture, small and medium-scale industry or the informal sector, and how that can be neutralised through future policy interventions, the document focuses on how it has helped in increasing digital payments. The report takes a further disingenuous leap by suggesting that demonetization might help in improving the future tax-GDP ratio, which will then eventually feed into a higher investment rate for the economy. This is based on the spike in tax returns witnessed during 2016-17, part of which was definitely due to increased compliance (and there should be a study about whether that has continued), but was also partially due to the arrears paid out under seventh pay commission awards, which came into effect a few months before November’s demonetization.

Even the independent paper disappoints with generalizations, inherent contradictions and lack of specifics. For example, the paper argues for “overdue labour reforms", which impinges on a state subject, since labour is part of the concurrent list. At the same time, it argues for more increased decentralization with more power and funding delegated to the states, as well as to municipalities and panchayats, the third tier of governance.

But a more generalized anxiety arises from the subterranean policy creep towards a universal basic income (UBI), or variations on the same theme. Ever since former chief economic adviser Arvind Subramanian suggested it in his Economic Survey of 2016-17, UBI is increasingly being viewed as a more viable welfare solution than all existing social sector programmes, despite the multiple misgivings about UBI’s efficacy and moral underpinnings. The Economic Survey stated: “A universal basic income is, like many rights, unconditional and universal: it requires that every person should have a right to a basic income to cover their needs, just by virtue of being citizens."

The Group of 13 does not suggest UBI explicitly, but does tiptoe gingerly around the idea. Curiously though, it seems to advocate the replication of the Telangana government’s Rythu Bandhu Scheme across the country in the form of a fixed cash subsidy per-acre, per-sowing period. This is an odd, iniquitous suggestion, which mainly benefits land-owning cultivators and excludes tenant farmers, but side-steps drastic reforms in the input and the finished produce markets, which are monopolized by political cronies.

In conclusion, the two reports (and their supplements) fail to provide new insights in their coverage of different sectors and what is required to overcome the economy’s myriad challenges.

Rajrishi Singhal is a consulting editor with Mint. His twitter handle is @rajrishisinghal

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