Principal economic adviser Sanjeev Sanyal (left) and chief economic adviser K.V. Subramanian release the Economic Survey in New Delhi on Thursday (Photo: Ramesh Pathania/Mint)
Principal economic adviser Sanjeev Sanyal (left) and chief economic adviser K.V. Subramanian release the Economic Survey in New Delhi on Thursday (Photo: Ramesh Pathania/Mint)

CEA's playbook advocates blue sky thinking, nudge theory, religious norms

  • The Economic Survey said insights from behavioural economics can help design impactful public policy
  • The Economic Survey makes a strong case for using the massive amount of data generated by a rapidly digitizing economy for the public good

The Economic Survey tabled in Parliament on Thursday places a raft of new ideas in the arena of economic policymaking, embodied by the overarching need for India to embrace unfettered thinking in its journey towards becoming a $5 trillion economy.

In fact, the team that worked on the survey—an annual critique of the economy—was guided by “blue sky" thinking about what should be the right economic model for Asia’s third-largest economy, the Survey’s author and chief economic adviser in the finance ministry Krishnamurthy V. Subramanian said in the preface.

Such “blue sky" thinking found reflection in a wide spectrum of unorthodox proposals—from the need to emulate South-East Asian economies and tapping behavioural economics to drawing lessons in taxation and morality from religions, and learning the principles of right behaviour from the teachings of Gandhi.

The Survey, which said India needs to accelerate to an 8% growth rate to achieve the goal of becoming a $5 trillion economy, came suitably bound in a blue jacket, picturing a set of wheels indicating national priorities such as growth, exports and job creation.

The Survey said insights from behavioural economics can help design impactful public policy. It can help the State steer people to make the right choices without depriving them of the choices they have, as people tend to stick with the default options among a set of choices. The technique can help in scenarios such as persuading the well-off to give up subsidies, making people sign up for savings or health insurance schemes and making farmers buy fertilizers on time, said the Survey, citing global public policy experiments leveraging behavioural economics.

The impact of flagship government initiatives such as Swachh Bharat Mission, Jan Dhan Yojana and the Beti Bachao Beti Padhao provides testimony to the potential of behavioural change in India, said the Survey. Subramanian lays out an ambitious agenda for behavioural change on issues such as gender equality, a “healthy and beautiful" India, savings, tax compliance and credit quality.

“There is some merit to that. One has to experiment on this. People do tend to make choices based on motives and incentives. If there are right kind of incentives, people will behave accordingly," said D.K. Joshi, chief economist at ratings company Crisil Ltd.

The Economic Survey makes a strong case for using the massive amount of data generated by a rapidly digitizing economy for the public good. It describes data as a “public good of the people, for the people and by the people". Subramanian, however, distinguished intimate or confidential data from public data and said processing of the former would be in line with the Personal Data Protection Bill that is awaiting Parliament’s nod.

The Survey argued that small enterprises are not able to sustain the jobs they create, while large firms are able to create permanent jobs in large numbers. It, therefore, makes a case for removing incentives that encourage firms to remain small. “To unshackle micro, small and medium enterprises and thereby enable them to grow, all size-based incentives must have a sunset clause of less than 10 years with necessary grand-fathering," the Survey recommended. Easing labour laws can add many jobs, it added.

The Survey recommended ways of bringing a cultural bias in favour of tax compliance by honouring top taxpayers. One of the factors that drives tax evasion is individuals’ perception of the benefits and services they get from the government and how taxpayer funds are utilized in the economy. The Survey said that to encourage tax compliance, top 10 taxpayers within a district could be accorded due recognition. This may take the form of expedited boarding privileges at airports, fast-lane privileges on roads and toll booths, special “diplomatic" type lanes at immigration counters, etc. Also, the highest taxpayers over a decade could be recognized by naming important buildings, monuments, roads, trains and universities in their name. The idea is to set up “clubs" that exude not only social status, but also honour.

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