Introduction to Economic Survey 2020

The Economic Survey of India — flagship annual document of the Ministry of Finance, Government of India.

Presented by: The Department of Economic Affairs, Ministry of Finance presents the Survey in the Parliament — both houses

When: Every year, just before the Union Budget.

Prepared by: It is prepared under the guidance of the Chief Economic Adviser of India.

History:

First Economic Survey — 1950-51 — with the Union Budget

After 1964 — separated from the Budget and presented before the budget.

Nature :

• Non-binding
• Constructed and presented each year due to its significance.
  • Ministry’s view on the state of the economy of the country.
  • Reviews the developments in the Indian economy over the past financial year
  • Summarizes the performance on major development programs
  • Highlights the policy initiatives of the government
  • Prospects of the economy in the short to medium term

Reference to the epic treatise of modern economics, written by Adam Smith in 1776 — “An Inquiry into the Nature and Causes of the Wealth of Nations”.

The question posed by this book — “What causes wealth and prosperity of nations?” — relevant for India today because

• India aspires to become 3rd largest economy by 2025 from being 5th in 2019
• $5 trillion economy by 2025
• PM’s 73rd Independence Day Speech (2019) – highlighted only wealth creation can lead to wealth distribution

This year’s survey —

• attempts to craft a framework of policies that can foster wealth creation
• Tryst with socialism = skepticism and disrespect for wealth creators ………. Ill-advised
• attempts to put to rest such scepticism about the benefits accruing from a market economy

Wealth creation not new

• Kautilya’s Arthashastra supports this idea
• Thiruvalluvar’s Thirukural– ethical wealth creation as a noble human pursuit.
• India’s dalliance with Socialism is an exception and only ephemeral — History and present shows that invisible hand of markets was and should be the norm.
• Historical Evidence — India, a dominant economic power globally for more than three-fourths of known economic history — invisible hand of the market supported by the hand of trust led to such dominance.
• Contemporary Evidence — return to roots post economic liberalisation in 1991

Problems

Events from the Global Financial Crisis and the problems with the Indian financial sector provide evidence of the need for the hand of trust to support the invisible hand.

• Survey calls for introducing the idea of “trust as a public good”

Several levers for furthering wealth creation:

1. Entrepreneurship at the grassroots – new firm creation
2. Promote “pro-business” policies – unleashing competitive markets to generate wealth as against “pro-crony” policies
3. Integrate “Assemble in India” into “Make In India” to focus on labour-intensive exports and thereby create jobs at large scale
4. Efficiently scale up the banking sector — match the size of the Indian economy
5. Healthy shadow banking sector
6. Privatisation to foster efficiency.

With all the above — India’s GDP growth estimates can be trusted.