 Hello and welcome to NewsClick. We are going to take a look at the economic survey which has been presented today and I have with me Poranjaya Gohar Thakurtha to discuss the issues. Poranjaya, if you look at the economic survey, of course it's early just been presented so it's different. And it's a full document. It's treat, take two documents but going through all of that, a quick glance at it, it seems to have set the first part of the economic survey, focusing on how Nehru and socialism was wrong and instead we should go back to our Artha Shastra as well as the Adam Smith's, the invisible hand of the market and how this is now according to the economic survey by shown by the few years that the government has been in power. So do you think that's a fair comment on what I see in the economic survey right in the beginning? I think it's a fairly good summary of what has been expounded in considerable detail by the Chief Economic Advisor in the Ministry of Finance is Krishnamurti Subramaniam. And a special attempt has been made to highlight what you and I would describe as right-wing pro-market capitalist policies and at the same time debunking the bad old days of socialism so to say and at the same time trying to offer a critique of all those who have been criticising the government's policies on whether or not our rate of growth of gross domestic product has been overstated, overestimated. They said no and they said government intervention actually undermines markets and hurts more than it helps. That's the chapter four, the headline and it says no we were not opposed to government intervention but what has happened is excessive government intervention then again without naming Ambani and Adani it says that the way forward is pro-business versus pro-crony and also by business rather than your business friends and who's a crony and who's crony because you see it just interrupted this point. The point is we are seeing concentration in the hands of few accelerating over the last 10, 15, 20 years. So this is not pro-market meaning more competition but it is pro-market meaning concentration of monopoly power in the hands of the few and that has not decelerated in this government in fact it is accelerating. You know what is actually important is what has not been said. So just as in the chapter, the third chapter which is pro-business versus pro-crony no specific instances have been made and let me just you know come specifically to certain points to highlight why what has not been said is equally important it says pro-crony policies as reflected in discretionary allocation of natural resources till 2011 led to rent seeking by beneficiaries while competitive allocation of the same resources post 2014 have put an end to such rent extraction. Similarly, crony lending that led to willful default when the promoters are collectively siphoned of wealth from banks led to losses that dwarf subsidies directed towards pro-development. It's as if before 2014 everything was terrible and after 2014 suddenly hunky dory everything is fine and I'll give you another example you know for instance he's trying to link what the complication I mean all the complexities of economics all the the regressions the equations to at the end of it Thali no means the economics of a plate of food in India begins with a court from the Rig Veda and ends up saying that if you look at what has happened between 2006-7 and 2019-20 then the affordability of a vegetarian Thali as well as a non-vegetarian Thali it's gone up by 29% vegetarian Thali and non-vegetarian Thali. Once again you're taking a big span because it suits you at that particular point to compare 2006-7 with 2019-80 but you're not looking at what has happened and what's also significant and maybe I missed it but I didn't find anything about inequality. Now of course if you say pro-wealth creators this question is not that the wealth creators are people working in the factories or other people it's really wealth creators aren't those who own the companies. Correct. But I'll come to this just a minute later. But talking about inequality etc leaving that out as you raised you know the key issue right now facing all of us seems to be the fact that there is a huge deceleration of the economy. Now that at least in the parts that we have read till now we don't seem to find that as a reference it is not that everybody's been talking about the slowdown of the manufacturing sector we also do not talk it doesn't seem to talk about the fact that we have stagnation in manufacturing if not drop coupled with inflation particularly food inflation coming back to your Thalinomics as it is being talked about. So this which has been for everybody the key issue the slowing down of the Indian growth story all of that is not mentioned and the other part of this that's an interesting part if you look at it also they're not talking about manufacturing they are saying service sector repeatedly the growth is going to go to service. You've touched on a number of points let's let me try and summarize some of the some of the points that my in the limited time I've had to go through the economic survey what it means firstly let's stick to this issue of growth they stick to the estimate of 5% growth it's the slowest rate of growth in the last 10 years in 2008-9 secondly it says that in the coming financial year that is 2021 the year that begins on the 1st of April 2020 the GDP growth would go somewhere between six and six and a half percent okay good nice optimistic production it also says and this is a hint over what may come when Nirmala Sitaravan presents a budget on Saturday the 1st of February the fiscal deficit may need to be relaxed to revive interestingly the same economic survey which otherwise it says you know we have to believe in the market goes back to Adam Smith and Adam Smith's epic treaties on modern economics written in 1976 talks about should be just creative destruction everything but says no things are bad therefore we need to increase the deficit now what is interesting it also says that private investment may get crowded on higher spending by the government on infrastructure so you know it's in that sense sticking to the classic right-wing view on what needs to be done to revive the Indian economy without acknowledging what has gone wrong in the last six years now or whatever what is the crisis currently not even addressing for instance it says you need to now reinforce assemble in India with making India and if you know the the president of India speech also talked about how India is a major assembler of mobile phones so I'll just give a quick statistic on this issue particularly of mobile phones you know the iPhone for instance is manufactured by Foxconn in China okay and out of the total amount of money they get four dollars in profits four to seven dollars in profits and roughly about two hundred dollars goes to Apple so assembling gets you a very small fraction of the total value and particularly for mobile is where the really the value is in software in the design in the chips and so on you know what Dr. Subramanian has said is he is at one level saying things that is music to the years of his political masters and that is the idea of wealth creations rooted you know he says in India's old and rich tradition ranging from Kautilya's Artha Shastra to Thiruvallu's Thirukulat which emphasizes ethical wealth creation fine that's all very fine and describes that as a noble human pursuit at the time when it comes to the chapter on crony capitalism it does mention name all it says that the survey makes the case that the churn created by a healthy pro-business system generates way to wealth than a static pro-prony system note that the survey contrasts two systems the arguments are not directed at any individual entity instead it argues for eliminating policies that undermines markets through government intervention even where it's not necessary for instance it's fine to say that you know I mean these are what are called motherhood statements and the Americans would say it's like motherhood and apple pie nobody can have any objections to it when you look at it blindly but what is important is what you've not said for instance the whole chapter on cronyism for instance doesn't talk about the telecom industry I haven't gone through the details maybe inside the details could be there the the whole there's an entire chapter which is which is chapter 10 and it's a very long and detailed chapter and it starts with an anonymous quotation saying correlation is the basis of superstition and causation the foundation of science and then it spends a lot of time doing correlation to debunking what this Dr. Subramaniam's predecessor the other Dr. Subramaniam that is Arvind Subramaniam had suggested that we might be actually overestimate our rate of growth by about two and a half percentage points and at the same time it concludes I mean it says yes you know in this context the setting up of the 28 member standing committee on economic statistics headed by India's former chief statistician is important nevertheless carefully constructed evidence in the survey must be taken on board when assessing the quality of Indian data essentially a lot of time and effort has been spent on trying to explain that actually you know we're not doing all that badly I am yet to come across how do you explain the slowdown electricity consumption how do you how do you expect the slowdown in the rate of growth of diesel consumption and what many economists are arguing that there is no I mean if your economy is actually growing at four and a half percent or even five percent it doesn't explain the rates of growth or in certain areas that decline in the rates of growth of electricity production and consumption and diesel the rate of growth of diesel so I mean there's a lot that perhaps I have to look at the time frame like at this juncture I don't want to say very much looking but we can only look at the big picture right now because it needs some time to de-parse all the things that have been said but what is missing here are a an explanation for the stagnation of the Indian economy and what the government is going to do except to say quantitative easy but reduce that the deficit will be allowed to grow that is one thing said in a negative way rather than the positive way secondly helping business because again you are not going to make interventions directly you're going to really be pro-business that's a pro-market that's what it says and the third point it does not seem to address the issue that you have stagnation now combined with the relatively high rate of inflation which you haven't seen for the past few years including food inflation which is a very important element now I have to look at the fine frame but what is interesting is all the once again let's go back to the motherhood statements that have been made now for instance it says that we need more reforms to make it easier to do business right underlying what are these start new businesses register property pay taxes enforce contracts remove red tape okay again excellent all good things you're saying but wait then look carefully it also says the weak global growth has impacted India it also says that the investments slow down in the financial sector so you know it's it's at one level acknowledging the problems but suggesting a series of measures which will actually take which would be just a repetition of the same policies now standard again for what to be created Mr. Modi our prime minister has said it has to be first created look at wealth creators with respect once again he goes back to the way we have allegedly we talked about that debunked all those things yes we talked about that but you know the other thing that it seems to miss out completely is that when you for instance decide to say remove what are called controls and remove state sector which is basically selling assets cheaply to others if you do that and you provide the business the so-called wealth creators with lots of funds from the banks you will get an initial rise because of obviously there's money flowing into the sector but it is not sustainable and it works out in terms of fall later which is what we're seeing right now and also the fact that there's a huge overhang of now debts with the corporate houses that the wealth creators are failing to pay and are being continuously bailed out now this part of the picture which is what actually Raghuram Rajan had raised if you remember in fact that was one of the issues that was there and even Arvind Subramaniam has talked about some of these issues he talked about the twin balance sheet crisis this is what Raghuram Rajan is saying you have a crisis in the balance sheet of banks as well as the large corporate instead what they are arguing is actually it's a detailed and unsafe very sophisticated justification of all that they've done so they said no no we're not arguing that we don't need government intervention but you know he talks specifically of two instances the essential commodities act it neither brings down prices nor reduces price volatility and then it comes to yeah but you know the essential commodities act is really a 50 60s creation when we have shortages right and then he talks about the drug price control order of 2015 he thinks it's not helped so in a way he's basically going on to say that government intervention eliminating such instances of needless government intervention will enable competitive markets and thereby spur investments and so forth so far we haven't seen that happen let's wait and watch let's look at the banking sector a little bit in order to justify the recent decision taken to merge on the bank he is critical of dwarfism in the banking sector and at the same time say we need to improve governments in public sector banks need for more disclosure of information to build trust etc you know what the banks have been disclosing in the balance sheet and what the rbi has been doing there's a huge gap and and this concerns not just india's largest bank the state bank of india but you know a whole lot of banks which are financially in a mess so also private banks of course like his bank so in a sense what we are seeing is that the modest endeavor of the economics away of 1890 he's using principles of behavioral economics as instruments of economic policy to have insights about human behavior and that's the justification for presenting what he called thalinomics and I'm going to interrupt to this point if you remember uh behavioral economics can lead to what what the itself itself demands correlations being mistaken for calling you know actually causation so if you talk about behavioral economics it's really correlations that you'll be looking at and not any analytical model of course let's wait and watch and go through the fine printing greater detail if this dr krishnamurti sumramaniam is justified in arguing as he said in the conclusion of the preference right up front where he says the economic survey has made a sincere effort to live up to the expectation of being an indispensable guide for following understanding and thinking about the economy I'm sure when you look at the fine print when you look at the statistics you'll find that those statistics don't always would not necessarily paint you a very rosy picture or are a bright picture of the current state of India's economy thank you apology I think I'm going to end with this what you just said that the economic survey becomes an humble attempt to craft a framework of policies I think they have much to be humble about if we look at what they have presented thank you very much apologies for being with us this is all the time we have for today for this click do keep watching this click and look at our economic survey follow-ups that we are going to do as we get more details of the same