Friday, February 27, 2015

Uneducated media's irrational exuberance over Economic Survey 2014-15. Survey says, "Boldness in areas where policy levers can be more easily pulled by centre combined with that incrementalism in other areas that can cumulate over time to Big Bang reforms"

The Economic Survey tabled by finance minister Arun Jaitley in the Lok Sabha on Friday opens on a rhetorical note but it walks a tight-rope between facts and possibilities. The rhetoric is worded most cunningly: "As the new government presents its first full-year budget, a momentous opportunity awaits. India has reached a sweep spot -- rare in the history of nations -- in which it could finally be launched on a double-digit medium-term growth trajectory." The media has highlighted "double-digit" and not "medium-term". Again it notes: "This opening has arisen because facts and fortune have aligned in India's favour." The Modi government has nothing much to do with this. But it is in a position to take advantage of it.

The other rhetorical formulation in the Survey is: "Any Economic Survey has to grapple with prioritization, to navigate the competing pitfalls of being indiscriminatorily inclusive and contentiously selective." And a paragraph later, it says, "But "wiping every tear from every eye" also requires proactive support from the government in the form of a well-functioning, well-targeted, leakage-proof safety net that will both provide (minimum income) and protect (against adverse shocks)." The media enthusiasts will read the first sentence and not the second.

Now comes the important issue of Big Bang reforms. The Sruvey says: "Given the expectations surrounding the upcoming budget, one question needs to be addressed head on: Does India need Big Bang reforms? Much of the cross-country evidence of the post-war years suggests that Big Bang reforms occur during or in the aftermath of major crises. Moreover, Big Bang reforms in robust democracies with multiple actors and institutions with the power to do, undo, and block, are the exception rather than the rule. India today is not in crisis, and decision-making authority is vibrantly and frustratingly diffuse."

And it takes the liberty of pointing to the role of the Comptroller and Auditor General and the Supreme Court as well: " Not only are many of the levers of power vertically dispersed, reflected in the power of the states, policy-making has also become dispersed horizontally. The Supreme Court and the Comptroller and Auditor General have all exerted decisive influence over policy action and inaction."

The media enthusiasts also need to read this sentence: " India need to follow what might be called " a persistent, encompassing. and creative incrementalism but with bold steps in a few areas..."

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