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View: Fresh ideas must lead to action

An entire chapter is devoted to data with focus on it as a public good. This is a refreshing take.

ET CONTRIBUTORS|
Jul 05, 2019, 07.36 AM IST
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BCCL
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Importantly, the Survey looks to reposition the debate on economic thinking by advocating a growth model for India that views the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.
By Sachidanand Shukla

The economic survey is presented just a day prior to the Budget, but its recommendations don’t necessarily shape the entire Budget and hence it is not exactly a precursor to the Union Budget. The Survey is also the annual report of Indian economy for the year gone by and hence also provides a compilation of numbers and statistics on how various segments of economy performed during the past year. Yet, this format has not, over the years, prevented it from becoming a beacon as well as a repository of interesting economic insights.

This year’s Survey is no different. There are several interesting themes that have been discussed in the Survey. Some of the themes look apt and timely for an economy that is aspiring to scale $5 trillion.

One of the more interesting proposals is the one to use behavioural insights for more effective policymaking and favours the concept of ‘nudging’ to change social norms and influence public behaviour. It highlights the importance of these insights in the success of the Swachh Bharat Mission and the Beti Bachao Beti Padhao schemes. The suggestion to set up a behavioural economics unit at the Niti Aayog and a compulsory ‘behavioural economics’ audit for public programmes is noteworthy.

An entire chapter is devoted to data with focus on it as a public good. This is a refreshing take. This could, as the Survey argues, be a new source of revenue subject to relevant laws but can be critical in encouraging behaviour change among producers and consumers. It avers “Skilful use of technology when combined with an unwavering commitment to monitoring effectiveness of government schemes can make a substantial difference on the ground”. In fact, it suggests that demand for work under MGNREGS may be used to develop a real-time indicator of distress at the granular district/ anchayat level. This can be a useful policy tool to tackle rural distress in a timely manner.

It is also heartening to see that the Survey has pointed out that EVs hold enormous potential for India and that “it may not be unrealistic to visualise one of the Indian cities emerging as the Detroit of EVs in the future”. It advocates appropriate policy measures are needed to lower the overall lifetime ownership costs of EVs and make them an attractive alternative to conventional vehicles for all consumers.

The survey discusses the need to push policies that aid MSMEs to grow larger. It highlights something known and discussed among policy circles – that policies currently nurture “dwarfs”; small firms with less than 100 workers that never grow, instead of infant firms that can become large rapidly. The document argues for the need of a sunset clause of less than 10 years with necessary grand-fathering for all size-based incentives, which have created perverse incentives for firms to remain small. It also highlights the need to ease labour laws by arguing that states with relatively more flexible labour regulations have contributed more to employment The document also highlights the need to simplify the minimum wage system in India, which currently has 1,915 minimum wages defined. It focuses on the need to restrict fixing the minimum wages for just four categories—unskilled, semi-skilled, skilled and highly skilled—based on the geographical region.

Importantly, the Survey looks to reposition the debate on economic thinking by advocating a growth model for India that views the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium. It also postulates that attempts to solve job creation, demand, exports, and economic growth as separate problems will not yield desired results. The Survey makes the case for investment as that key driver of growth as well as jobs and cites global evidence pointing out that savings have to increase more than investment to allow for the accumulation of precautionary savings. However, the document does not share any specifics on how to up the savings and investment rates although it goes on to highlight the need for predictability of policy, given that higher economic policy uncertainty lowers investment.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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