The annual bird’s-eye view of the economy strongly emphasized the need for the government to loosen its pockets to aid the recovery without worrying too much about the fiscal deficit.
Union Budget 2021-22: Full coverage
He estimated that the strict lockdown had flattened the curve and protected more than 37 lakhs of Indians from contracting the highly contagious coronavirus, in addition to saving more than one lakh of lives.
In a strong attack on credit rating agencies, he said that India’s sovereign credit ratings had been consistently much lower than its fundamentals and debt situation would warrant. “India’s fiscal policy, therefore, should not be subject to noisy / biased measure and instead should reflect Gurudev Rabindranath Thakur’s sentiment of a fearless mind,” the survey said.
The survey compared data from countries and states in India to argue that the primary focus in India’s stage of development should be promoting economic growth rather than reducing inequality. Growth, he said, had a “much greater effect on alleviating poverty than inequality”, adding that “redistribution is only possible in a developing economy if the size of the economic pie increases.”
Unsurprisingly, the survey established a passionate defense of the new farm laws, stating that they seek to give farmers a freedom of choice that has hitherto been denied them. It also set a schedule of “consultations / recommendations” dating back to 2001 in an attempt to counter the charge that they had been hastily approved.
The survey called for health care regulation to address “market failure” in the sector. Urging governments, particularly states, to increase public spending on health to 2.5% of GDP to reduce out-of-pocket costs for patients’ families, he also called for a quality assessment framework, citing the UK Assessment and Quality Framework as a possible model.
In a separate chapter specifically on the PMJAY (Ayushman Bharat) scheme, the survey, whose lead author is the chief economic adviser to the Ministry of Finance, Krishnamurthy V Subramanian, made comparisons between states that had adopted the scheme and those that had not shown clearly that the plan had led to better health outcomes on a variety of parameters.
While calling for regulation of the healthcare sector, the survey found that overall, the Indian economy had been negatively affected by too much regulation. Complex regulation that aimed to anticipate all possible situations rather than light oversight was India’s nightmare, he claimed.
The survey warned of high stock prices. “While equity markets value potential future growth, these elevated levels still raise concerns about the disconnect between financial markets and the real sector,” he said.
The two nearly 900-page volumes of the survey had a handful of references to cricket (36 from India and the subsequent V-shaped recall in Australia), Bollywood (Amitabh Bachhan starring Main Azad Hoon), and ancient lore scattered by a lots of graphics. and graphs that sought to bring home each data point.
Noting that the “regulatory tolerance” – relaxed regulations on bank classification of stressful loans – introduced in the wake of the 2008 global financial crisis had been allowed to continue for too long, he cautioned that the same mistake should not be repeated again. Relaxing the rules for non-performing assets (NPA) was a valid response to a crisis, but it became a “staple diet” long after the crisis ended, he noted. That, he said, had led to bad loans by banks and reckless investments by borrowers.
By proposing a “basic needs index” to map how states ranked in terms of access to fundamental needs such as clean water, sanitation and housing, the survey said data from the National Statistical Organization showed that all states had made progress. on these fronts between 2012 and 2018. Likewise, the states that were in the worst situation had made greater progress in closing the gap with the others. Similarly, the poor had earned more than the rich. By focusing on these basic needs, he noted, it also improves health and education outcomes.
One of the few areas in which the survey expressed concern about India’s performance was inadequate spending on R&D, compared to other large economies. Even the limited spending on R&D and resource allocation was largely due to the public sector with Indian companies not doing their best, he noted. “This points to the need for the Indian business sector to significantly increase investments in R&D,” the survey emphasized, saying that “India’s aspiration should be to compete in innovation with the top ten economies.”
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