Here the Survey highlights the Essential Commodities Act (ECA) in particular, using research that shows that the imposition of stock limits had “no effect” on price volatility of onions over the past year, but that 76,000 raids under the ECA were conducted during 2019 of which under four per cent led to convictions.
Thus, the main effect of the ECA was to harass traders and to dis-incentivise inventory-keeping. Similar policies which had counter-productive effects included the Drugs Prices Control Order of 2013, which the Survey said increased the prices of drugs sold through hospitals.
Highlighting the sharp increase in major subsidies in the Budget, led by the growth in the food subsidies, the Survey pointed out that “the intervention of government has led to a disconnect between the demand and supply of grains” and argued that farmer support needs to be realigned towards incentivising farmers to diversify their production away from foodgrain.
The Survey also argues in favour of integrating India with world markets deeply enough that “network products” such as electronics and automobiles are assembled in India for world markets. In this context it dissents from general government policy by pointing out that recent free trade agreements have in fact benefited India, finding that on the average Indian exports to its FTA partners has increased more than imports. The Survey reiterated in this context that policy measures “should focus on reducing input tariffs and implementation of key factor market reforms”.
Other chapters of the Survey focused on the growth of entrepreneurship, on dealing with cronyism, and privatisation. On entrepreneurship, the Survey found that a 10 per cent increase in the registration of new firms in a district led to a a 1.8 per cent increase in the district’s output. It argued also that the anti-corruption moves since 2011-12 had led to a reduction in cronyism that was visible in the data on, for example, related party transactions of firms receiving natural resources.
In spite of its justification of fiscal slippage, the Survey also pointed out that the root cause of the slowdown was low private investment. It blamed that on risk aversion in scheduled commercial banks (SCBs) following the non-performing asset crisis. But it also gestured at government borrowing as a problem, saying that the “easy investment in G-secs” was a complementary factor and that SCBs “chose to invest thrice the amount in G-Secs in the current year as compared to the previous year, while reducing their credit off-take by more than four-fifths”.
In terms of policy prescriptions for the financial sector, however, the Survey has been relatively restrained. Instead of arguing again for greater private control, Subramanian instead suggests leveraging big data algorithms by pooling data held by public sector banks, and by increasing employee ownership to give them more of a stake in the PSB’s performance. The CEA also devoted a chapter to seeking to refute the finding of his predecessor, Arvind Subramanian, that India’s GDP was overstated.