The Survey puts the growth number at 6 to 6.5 per cent, against the Advance Estimate of 5 per cent for FY20. We just see that the National Statistical Office has revised downwards the FY19 number, from 6.8 to 6.1 per cent
and not sure what the final number for FY20 could be!
The Survey forecast appears to be on a higher side, which could be aspirational and depends on the Budget proposals.
Most interesting chapter in volume-II is the external sector. Here it argues for promoting exports through liberalising imports. In other words, the Survey very rightly argues that India's exports, especially manufacturing, is increasingly import-led.
Hence, what is needed is reduction in import tariffs, especially on intermediate inputs and raw materials.
This view could be in contrast with the current government’s thinking of going for import protection policies. We hope the finance minister could head to the Survey findings and cut the duties while there are pressures to hike. The Survey dedicates one chapter to bank nationalisation and brings out the benefits and costs of public sector banks vis-à-vis private ones. It goes to an extent of putting the cost of public sector banks — a loss of 23 paise out of every one rupee of the tax payers invested! I guess this could have been avoided.
As public sector banks have huge social obligations, one should estimate social costs and benefits. It is unfair to compare public and private sector banks with same parameters of efficiency. If the public policy is to enhance financial access and financial inclusion, one major way is by expanding public sector banks.
The Survey argues that the decline in the GDP growth
in the recent period is largely due to financial fragility. While it does not dwell much on how to improve the financial sector, the empirics show the causality is both ways. Overall, if we have to improve growth prospects, it is the fiscal policy that needs to be proactive to help restore stability. One would have expected the Survey to recommend bank recapitalisation. If not, revival in investments could take longer and costlier than expected. On the technicalities, it is just surprising that Survey makes big conclusions based on five data points when it says credit expansion between 2008 and 2012 led to negative investments between 2013 and 2017. Here the Survey ignores its own statement that "Correlation is the basis of superstition and causation the foundation of science".
But the big question that remains is how long it will take to create trust that the Survey argues for.
Views are personal/ N R Bhanumurthy, Professor, National Institute of Public Finance and Policy