The Economic Survey 2017-18, released Monday, dances along an intellectual and conceptual stocktaking of the economy. Like in the past, Chief Economic Advisor Arvind Subramanian made sure he has more in his pocket than conventional forecasts. The creative data mining made startling discoveries, which for data geeks is a feast full of meat, dessert and drinks.
In short, the Survey attempts to explain this: the economy is humming, but there are a few levers to pull. So the government should avoid further surgical strikes and simply stay the course convincing voters that the extreme punishment via demonetisation and GST was a doleful necessity, but has started yielding results.
Lower tax and non-tax revenue did upset the economic applecart, and though GST is in lockstep, its full fruits are unlikely to come in time for the next elections. Hence the survey suggests Finance Minister Arun Jaitley get over his obsession to shrink deficit and instead, spend. Bank credit is coming out of its torpor, but private investments will sulk as the dreadful mess called the twin balance sheet crisis prevails.
The Insolvency and Bankruptcy Code is timely, but it needs to be further bobbed and weaved to help dress up balance sheets back in shape. The projected 7-7.5 per cent growth next fiscal is below potential, but rising crude prices may stall growth in its tracks. As for markets, the CEA tells the story straight: elevated prices could be the widow-maker, as no stock rally lasts forever.
The Survey touched upon diverse topics from judicial reforms to tax litigations, but more striking was its finding on the formal sector, which now appears bigger than previous estimates, and in a way punctures the Opposition’s criticism on job creation.
The fabled fiscal policy now has three targets: finding jobs, creating an educated workforce and raising farm productivity, by stabilising GST, wiping off bad loans, improving exports and private investments. That said, to quote economist John Maynard Keynes, “The inevitable never happens. It’s the unexpected always.”