One part Adam Smith, one part keynes & a bit of Arthashastra
Economic Surveys have one fundamental purpose. Its architects led by the chief economic adviser advocate how complex econometric principles can be used to best deliver public services. Typically, most Surveys have a populist tinge like in 2017 when the spotlight was on Universal Basic Income. But the latest Survey shatters all records and for the first time, unabashedly favours capitalism. CEA K V Subramanian minced no words elaborating why India needs wealth creators and how free markets can keep the economy going. The idea was seconded by none other than PM Narendra Modi, who believes only when wealth is created can it be distributed.
India is now a mixed economy with elements of both capitalism and socialism. There’s nothing wrong in moving towards a free market society, where individuals own and control all factors of production. But developed nations that long tested this hypothesis aren’t fully successful, have seen inequality widen, and have imbalance between social spending and economic growth. Moreover, episodes of graft and greed and how capital accumulation rests with a few are many. But the Survey has no prescriptions to avoid the old-fashioned avarice.
Meanwhile, dismissing overt concerns about GDP overestimation, the Survey concluded slowdown has indeed bottomed out and FY21 will see growth rebounding to 6-6.5%. But for that to happen, the CEA suggested counter-cyclical measures, including tax cuts or higher spending or both. The Survey even channelled Margaret Thatcher’s privatisation of state enterprises, in effect minimising the government’s role in doing business. It talked about how exports can fuel our $5 trillion dream to how assembling parts in India can create four crore well-paid jobs over the next five years. In essence, the Survey is one part Adam Smith, one part Keynes, with a bit of our own Kautilya’s Arthashastra tossed in. But then, economics is an imprecise science. There’s no divine policy intervention. Based on the situation and evolving market dynamics, we need to overhaul policies and regulations.