Thank God, CEA Arvind Subramanian is not a bureaucrat

“If Arvind Subramanian were a bureaucrat, then probably he would have painted a rosy picture in the Economic Survey. But being an eminent economist, he can’t sully his image built over the years by putting forward a false picture of the economy,” quipped a leading economist on condition of anonymity on Tuesday afternoon after the Survey, prepared by the office of the Chief Economic Adviser to the Government of India, was laid in Parliament by the Finance Minister,

Prime Minister Narendra Modi may not have wanted to hear some of the things put forward by the Economic Survey 2016-17. It admits that the “radical measure” of demonetisation did pull down economic growth for the current financial year but holds out hope that it will rebound in 2017-18 but perhaps only in the range of 6.75-7.5%.

The Survey also raises certain red flags—low employment figures, declining investment rate, saving rate and increasing commodity prices, especially of that of crude oil.

Some of the interesting points raised by the Survey are:

• The Economic Survey 2015-16 had predicted the Indian economy to register the GDP growth rate in the range of 7 to 7.75% in 2016-17.
• The investment to GDP ratio has been “consistently declining” over the last few years. This trend “needs to be reversed” at the earliest in order to realise higher and lasting economic growth.
• The “savings rate will have to be raised” so that investment can be financed without resorting to high dose of external financing.
• International prices of crude oil have started to trend up, after remaining fairly stable for much of the last two years. This along with rise in the prices of other commodities like coal, etc “could exert inflationary pressure” and have the potential to “adversely impact the trade and fiscal balances.”
• The results of the quarterly quick employment surveys in select labour-intensive and export-oriented sectors by the Labour Bureau for the period December, 2015 over December, 2014 show that the overall employment increased by 1.35 lakh. As Prime Ministerial candidate, Narendra Modi had promised to create “one crore jobs” per year.
• Employment declined in gems and jewellery sector, handloom/powerloom sector, leather, automobiles sectors and transport sector during the same period. The sectors that contributed to job increase included IT/BPOs sector, textiles including apparels and metals.
• Growth rate of the industrial sector is estimated to fall to 5.2% in 2016-17 from 7.4% in 2015-16.
• Agriculture sector is estimated to grow at 4.1% in 2016-17 as opposed to 1.2% last year. However, the Survey doesn’t specify that the last two years have been drought years, and hence a low base to compare.