Economic Survey returns home after a decade

The striking feature of the Economic Survey 2021-22 laid in Parliament by Finance Minister Nirmala Sitharaman is that it hews the closest to the Budget, due tomorrow, than any of its predecessors has been in the past decade. The Economic Survey also may have put an official stamp to judge economic conditions to an array of indicators instead of the venerable but often outdated quarterly and annual Gross Domestic Product (GDP).

After eight years, the Economic Survey, the Government of India's annual context-setting document on the economy, has stopped being a commentary of the chief economic adviser (CEA) of the day. It was no coincidence that there was no CEA since December last year, so we shall have to wait for another year to see if the new CEA, appointed last week, V Anantha Nageswaran sticks to the new script.

For now, the latest Economic Survey has stopped its recent habit of getting ahead of itself and trying to offer commentary on the Budget, days ahead of it being presented. It was often a delightful commentary and sometimes at odds with the finance minister's position. The preface to the document this time makes the discomfort clear. "It was also felt that the thematic chapters of Volume 1 were not adequately linked to the sectoral chapters of Volume 2."

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In 2019, Volume I of the Survey published data on revenue to GDP ratio for FY19 that differed from the revised estimates presented in the Budget documents. Since both were Parliament documents, Sitharaman had the unenviable task of defending the Budget numbers and contradicting the Survey data in Parliament.

Besides being a faithful record of the finance ministry worldview, what else does the Economic Survey do, which will help us understand what the finance minister shall say in her Budget speech tomorrow?

It offers some significant nuggets, like stating the government now has space for more fiscal interventions, which means it can breach the limits set by the targeted fiscal deficit. It means, as expected, there shall be generous additional spending commitments in key sectors.

The more significant takeaway is how it arrives at its conclusion. The "how" is couched in an array of high-frequency data, or HFIs the Survey deploys, demonstrably for the first time. The volume, written by a team under the Principal Economic Advisor, Sanjeev Sanyal, notes, "Government (has) leveraged an array of eighty HFIs representing industry, services, global trends, macro-stability indicators and several other activities, from both public and private sources to gauge the underlying state of the economy on a real-time basis. These include electricity generation, scheduled domestic flights, volume/value of financial transactions, capital flows, mobility indices, and so on."

Happily, the list also includes the quarterly data on employment as seen through net enrolment in the Employees Provident Fund, released by the Ministry of Statistics every quarter. As its rationale for basing government policies on this range of data, the Survey notes that in a period of the pandemic, it is difficult for the government to come up with a response based on annual data. By the time those data arrive, the challenges have moved on. This is salutary.

As the Survey notes, the framework is based on feedback loops, real-time monitoring of actual outcomes, flexible responses, safety-net buffers and so on. The process borrows from the way the corporate sector works on data. "Planning matters in this framework but mostly for scenario-analysis, identifying vulnerable sections, and understanding policy options rather than as a deterministic prediction of the flow of events. The last Economic Survey did briefly discuss this approach, but this time it is a central theme," the Survey adds.

It is welcome, even though it leaves space for the government of the day to pick and choose. For every data that goes against its narrative, it can retort with one that is favourable. While that may be inescapable, for the government, however, it could be a most healthy development. In recent years, data has been one of the most contested territories in the arguments over the performance of the economy. More data has to be now put on the public plate—GSTN disaggregated data, for instance, is still not available. But as most of these data will need to be available publicly, both keeping them flowing free and keeping their sourcing free of political choices shall become essential for the people to assess the economic temperature themselves.

(Subhomoy Bhattacharjee writes on business and economy)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.

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