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S. Venkitaramanan

THE annual Economic Survey, coming as it does a day or two before the Budget, tends to get drowned in the glare of attention to the main event — the Budget. Indeed, the Economic Survey is a document well worth concentrating on, considering the amount of detailed analysis of economic trends it presents. It is virtually a treatise on the economy, brought up-to-date every year. It does do an honest job of summarising all critical data and generally, presenting a transparent and unprejudiced view of the economy. I propose to devote this piece to some important snippets from the Survey, usually neglected in the hype over the Budget.

First and foremost, I draw attention to what the Survey provides — the national balance levels, so to say — an analysis of Government's assets and liabilities over the years. Total liabilities of the Central Government are substantially in excess of the assets — the external liabilities reckoned at extant exchange rates and the assets at historical cost (book value).

The total liabilities of the Central Government are substantially above the assets. This phenomenon is primarily due to the emergence of revenue deficits over the years, to meet which the liabilities (loans) incurred are not counterbalanced by equivalent assets, even in historical cost terms (Table 1).

The emphasis on reduction of deficit should, therefore, focus on reduction of revenue deficit, by cutting subsidies and ensuring enhanced user charge collections, to obviate losses in Government operation.

The important aspect of the Economic Survey, such as the balance sheet, will surely bring out dramatically the significance of the coming debt trap.

Another interesting snippet from the Survey that caught my attention was the data regarding unemployment. Latest data available in the Survey are for 1999-2000.

These show that the unemployment rate for all India declined marginally to 8.32 per cent compared to 8.30 per cent in 1983, rural unemployment rate remaining declining to 7.21 per cent, as compared to 7.96 per cent in 1983. Urban unemployment showed a significant change for the better, at 7.65 per cent compared to 9.64 per cent. The ground reality may, however, be different, considering the large army of unemployed knocking at corporate and Government doors.

The State-wise distribution of unemployment data is telling. Kerala, for all its much-touted model of development, has fared the worst, with an unemployment rate of 20.97 per cent in 1999-2000. Tamil Nadu too scores badly with 11.75 per cent. West Bengal scores better with 14.99 per cent in 1999-2000 and 10 per cent in 1993-94. Table 2 extracts the relevant figures for a few States.

The growth of employment over the period for all India has been only 1.07 per cent, much lower than the rate of growth of population. The figures are intriguing. The low figures for Uttar Pradesh and Madhya Pradesh are baffling. Overall, unemployment has grown.

It is, indeed, worth noting that the feel-good factor in the Budget has come about notwithstanding an absence of any specific reference to this menace that gnaws at the vitals of the economic and the social fabric. Jobless growth is of no use to India's unemployed millions.

If the Budget can be faulted from this point of view, it is essentially for not focusing on how to tackle this fatal flaw in India's economic strategy. The absence of jobs to provide for the unemployed is a key issue that the Budget should have focused on.

Another critical insight gained from a detailed reading of the Economic Survey was the fundamental unsustainability of our policies regarding food management. This is an issue which has been well covered by the insightful report of the High Level Committee on Food Grain Policy headed by Dr Abhijit Sen.

The report highlights the infeasibility of present policy — offering very high minimum support price and procuring wheat and rice on an open-ended basis. While the Budget hinted at strategies to diminish food subsidies, it has not focussed on the need to change the populist bias in food management.

It may be too much to expect the Budget to cover all issues, but this question of food management is one that I would have expected the Finance Minister to at least draw attention to.

It has critical implications from the point of view of not only the fiscal health of the country but also from the aspect of continuing appropriate cropping patterns. Turning to another subject, the Survey gives informative data (see Table 3) on world-wide flows of foreign direct investment (FDI). This brings out at a glance the distance that India has to travel in the FDI stakes.

It is important to note that most of the global FDI flows are to developed countries and among developing countries. China takes the lion's share. While it is alright to target larger inflows on FDI, the task seems challenging if only because of political objections to reform of our various regulatory impediments in respect of labour laws. There is some correlation between the attractiveness of China and Korea to foreign direct investment and their export performance. The way exports of these countries have boomed over the years is, to a large extent, linked to the large flow of FDI and the resultant linkages in markets back home by the foreign investor (Table 4).

Obviously, India has done very poorly compared to the gigantic performance of East Asian peers, China, Malaysia and Singapore. Export-friendly policies need reform of the whole regulatory and tax structure. The Budget 2003-04 makes a feeble beginning towards it.

The Economic Survey contains many more insights than the ones I have selectively outlined above. It appears to me that the effort and attention devoted by North Block's economists on preparing the Economic Survey do not get adequate response in the present disposition of the presentation.

Perhaps, it would be too much to ask for a special debate on issues raised by the Survey. That would, however, be possible only if the Survey precedes the Budget by at least a month. Hopefully, then the Parliament would devote its considerable energies — now spent in marching into the well — to understanding and debating the serious issues raised by the Survey. As it is, the Economic Survey hangs loose, scattering its insights to those who care to garner them.

Much better use of the Survey would follow, if Parliament — through its Consultative Committee on Finance — were given time and guidance to discuss the weighty issues that the Survey places on the table. The Finance Minister has initiated a number of reforms. Who knows, he may take up this gauntlet also, making the Survey much more than a mere love's labour lost. What could be a useful model would be to have the Survey placed before the Consultative Committee of Parliament on Finance. It is headed today by an acknowledged expert on finance. There could be much useful discussion between the members of the Committee and experts, who frame the report to the mutual advantage of both.

The lessons distilled from the exchange of views could be usefully fed into the process of Budget-making. Otherwise, the Economic Survey will remain as it has over the years, an ornamental exhibit that accompanies the many papers that go to the raddiwalah at the end of the Budget.

Surely, it will be a feast of delight for researchers and economists. But the purpose of a document placed before Parliament has to be much more than that. It has to kindle informed debate that can lead to the right decisions. Such a consummation involves a radical change of mindset among India's policy-makers.

But, it is worth trying. Use the Survey for the sensible purpose for drawing a consensus on economic policy, instead of being a mere appendage to the Budget. This is a change which one hopes Government will consider seriously, in its various attempts at reform of the process of Budget-making.

The Economic Survey deserves a better treatment than it gets today, coming as a tailpiece and not as the dedicated effort of a think-tank.

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Economic Survey : Draw lessons from it for Budget-making

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