CEA fetes Three Big Ideas of Economic Survey

Arvind Subramanian, the Chief Economic Adviser to the NDA government, has said that the Economic Survey 2014-15, of which he was the primary author, played three main roles — as a repository of facts and figures, as a technical analysis, and finally as an idea-generating document.

Giving the lecture, ‘Economic Survey: Taking Stock of the Indian Economy’ organised jointly by the Bangalore International Centre and the Indian Institute for Human Settlements in Bengaluru on Monday, he highlighted the three Big Ideas contained in the Survey. Arvind listed the big pitch made by the Survey for public investments in this year’s budget as the First Big Idea.

According to the CEA, the Indian corporate sector is not exactly super healthy. Also, the balance sheets in the banking system are not very strong. As a result, the outlook for private investment is not promising, he said. Arvind stressed the role played by stalled projects as a reflection on the weakened state of private investments.

“In most economies, there would be legal mechanisms for exit, but not in India,” he said, describing the country as practising a kind of capitalism without exit. He also took up cudgels against super strong institutions like CBI, CVC, etc. which are zealous in opposing exits. Arvind described the conundrum thus, “On the one hand, we have weak institutions for exit. On the other, we have crazily strong institutions in another way that make exit difficult. Maybe we need to solve this by converting it into a political process.”

Revived decentralisation
He listed the Survey’s analysis of the dramatic reshaping of the Centre-State fiscal relations by the fourteenth finance commission (FFC) recommendations as its Second Big Idea. Arvind said the NDA government took a bold decision to accept the recommendations even though it was feared that states would pocket the benefits and still blame the Centre. “And that’s exactly how it has played out.”

The CEA feels the FFC recommendations are going to radically change the Indian landscape because it gave away one per cent of the GDP to the states in untied taxes. “In order to make this work, the Centre had to cut the planned transfers of centrally sponsored schemes. The states have interpreted it differently,” he noted pointedly.

He said the FFC has reversed the clawback of decentralisation during the last 5-10 years through centrally sponsored schemes. “The FFC recommendations have changed that aberration and put the country back on the path to progressive decentralisation,” he said.

The CEA listed JAM Trinity Solution (Jan Dhan Yojana, Aadhaar, Mobile) as the Third Big Idea in the Survey. “One of the silent, but really quiet and deep revolution taking place in India,” is how he described it. In his view, the first-mile challenge in direct benefit transfers (DBT) is to target the beneficiary, while the last-mile challenge involves solving questions related to payment banks, mobile transfer of money, and a deep network of business correspondents.

According to Arvind, the JAM vision not only saves the government money, but by effectively executing the programme, it legitimises the government in the eyes of the people by ending the cynicism about the state. Finally, he described the effort as important for the economy. “Economists talk about third-generation reforms, but the JAM Trinity Solution is the need of the hour in a country where even first-generation reforms have not been done well.”