Thursday, September 29, 2022

In 10 points: What is the blueprint outlined by CEA in his maiden Economic Survey?

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New Delhi: In his maiden Economic Survey, Chief Economic Adviser Krishnamurthy Subramanian was not just candid about accepting the sore spots in India’s growth story but also presented a roadmap to take India to the $5-trillion GDP league by 2024-25.

Here are the highlights from the survey:

‘Investment is a key driver’

One of the most pertinent points made by the Economic Survey, which was tabled in the shadow of a slowing GDP, was that it termed investment as a ‘key driver’ of economic growth that perpetuates the virtuous cycle of savings, investment, exports and growth.

Citing China’s growth story, the survey said, “China has relied primarily on savings and investment with consumption decreasing significantly as a share of GDP. China remains an investment-driven economy even today with its investment and savings rates reaching about 45% of GDP even in 2017.”

“Investment, is the key driver that drives demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction, and generates jobs,” it said.

Health matters

“The behavioural insights from the Swachh Bharat Mission can be used for laying the foundations of a healthy India. A healthy India means more labour productivity which translates into more savings and more investment,” the survey said.

The financial savings to the poorest household due to behavioural change induced by Swachh Bharat Mission exceeded the financial costs by 2.4 times, the survey said.

A UNICEF study found that “on an average, every household in an open defecation free village saved about Rs 50,000 per year on account of financial savings due to lower likelihood of disease from using a toilet and practicing hand washing.”

Reforms needed in lower judiciary

The pendancy of cases at the lower judiciary level which leads to delay in contract enforcement is hampering India’s further growth on the ease of doing business index. The Survey advocated fixing this gap within the lower judiciary through various means like increasing the working hours, improving the administration of courts and using technology to speed up the clearance in India’s lower judiciary.

VIP privileges for top taxpayers

In order to reward top tax payers of the country, the Survey recommended giving incentives like, expedited boarding privileges at airports, fast-lane privileges on roads and toll booths, special “diplomatic” type lanes at immigration counters, etc.

Over a decade, top taxpayers could be recognised by naming important buildings, monuments, roads after them, the survey proposed.

Creating a Detroit in India

While visualising creating a Detroit for electric vehicles in India, the Survey said, “EVs hold enormous potential for India not only because it is environment friendly but also because India can emerge as a hub of manufacturing of EVs generating employment and growth opportunities. It may not be unrealistic to visualise one of the Indian cities emerging as the Detroit of EVs in the future.”

Reduce uncertainty in economic policy

The Chief Economic Adviser urged policymakers to double down on their efforts to reduce the scope of any uncertainty in economic policy-making as it affects investor sentiment.

The survey said that tracking the economic policy uncertainty index should be a priority for the government.

On labour laws

The survey asserted that labour laws need to be eased to spur job growth. “Deregulating labour law restrictions can create significantly more jobs, as seen by the recent changes in Rajasthan when compared to the rest of the states,” the survey said.

Foster growth of large firms

The survey asked the government to focus more on fostering the growth of large firms which employ more than 100 people, instead of focussing on smaller firms with less than 100 workers. The rationale behind the idea was that the share of smaller firms in overall job creation and prodcuctivity is negligible when compared to large firms which account for around 90 percent of overall productivity and three quarters of job creation.

Behavioural Economics an important pillar of policy making

While citing the example of voluntary giving up of gas subsidy in order to provide gas connection to poor households, Subramanian said that the scheme was a great example of the impact behavioural economics could have on the ground results. The survey, therefore, recommended taking insights from various government schemes which rely heavily on behavioural change. It also recommended setting up a “Behavioural Economics” unit in Niti Aayog and a “Behavioural Economics” audit for every government programme.
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On data revolution

The survey recommended using public data to revolutionise development in the country. Noting that data is the new oil, the survey said that data should be made a public good.

Data “of the people, by the people, for the people” must become the mantra for the government, which needs to view data as a “public good” and make necessary investments, the survey said.

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