On Budget eve, Congress tears into Modi govt’s Economic Survey report, calls it a ‘callous’ exercise

The Opposition Indian National Congress today tore into the Narendra Modi government and specifically the Union Finance Ministry after the Economic Survey (ES) (2019-20) was released. Professor MV Rajeev Gowda, Supriya Shrinate and Professor Gourav Vallabh took on the Economic Survey and pointed out that at a crucial time when the country was going through its worst economic trouble in the last 50 years, the ES was insensitive and suffered from a serious credibility crisis.

Pointing out that the ES was disconnected from ground reality, Gowda said, “Thanks to monumental mismanagement by Modi Government, the Indian economy is going through very difficult times. Yet, the Economic Survey 2019-20 released today is completely disconnected from this grim reality. But this is not surprising, as all of the Modi Government’s Chief Economic Advisers have ignored the ground realities in all these years. The CEA begins the ESI by singing the praises of wealth, drawing more upon historical references than economic theory. But even the historical references pay no attention to the distribution of wealth and the barriers to wealth creation, which existed in ancient India, for example, the caste system.”

He also pointed out how the ES showed an acute lack of attention to inequality.

“It is important to stop dwelling in an imaginary past and to pay attention to the realities of India’s economy in the last 100 years. We had to build a nation that had missed out on the industrial revolution and had been exploited by colonialism. Therefore, the Congress governments focused on growth and development steered by public sector spending and support. When we had built a strong enough foundation, we liberalised and India’s subsequent growth has benefited from our policies. Unfortunately, our efforts to catch up with the rest of the world has not been helped by the Modi government’s policies or by its CEA’s Economic Surveys. We find the CEA’s inattention to distribution and inequality totally objectionable. Even now inequality is worsening. According to Oxfam’s January, 2020 Report, India's richest one percent hold 42 percent of national wealth i.e. more than four-times the wealth held by 953 million people who make up for the bottom 70 per cent of the country's population,” he said.

He tore into the Modi government and said the ES had no prescription to revive demand, boost investment and create jobs.

Gowda said, “Economic Survey makes grand claims while the reality is: India has the worst economy in 42 years. Unemployment is at a historic high. For the first time in four decades consumption has fallen, raising the fear of increasing poverty and malnutrition. Revenues are drying up drastically. The government has now resorted to spending slowdowns and delays in transferring the states’ share in the GST. Our soldiers have to operate in Siachen and Ladakh without adequate equipment and requisite food. Yet, the Economy Survey will not tell you this. The entire exercise is now of chicanery and obfuscation.”

Gowda added, “The former Finance Secretary has on record claimed the fiscal deficit to be substantially more than what the government claims. The job of the Economic Survey is to tell us about the actual situation of the fiscal situation. Its purpose is to guide the government by showcasing reality and realistic policy options. This Survey comes nowhere close. Will this Survey inspire trust amongst investors? No! Do the people of our country deserve to know what the actual situation is? Yes!”

Taking a dig at Modi’s questionable academic credentials, Gowda said, “We are amidst an unprecedented demand slump. It does not take a degree in ‘Entire Political Science’ to understand that we need to raise consumption demand. One way would be through cash transfers to the poorest. Another would be by raising the incomes of the worst affected by the misadventures of the Modi government. We need to put money back in the hands of our farmers, agricultural labourers, urban poor and middle classes. What is the government’s plan of action on this front? You will not find a clue in the Economic Survey.”

Gowda also called the government’s announcement of the Rs 100 lakh crore National Infrastructure Pipeline a pipedream.

Mocking the introduction of Thalinomics in the ES, Gowda remarked that “Thalinomics is another obfuscation. The claims of affordable thalis are misleading especially after the NSS consumption survey pointed out how food consumption has reduced, we are facing fears of rising poverty and malnutrition. What we have are shrinking thalis. India has been constantly falling in the Global Hunger Index and ranks behind Nepal, Bangladesh, and Pakistan. The thali will soon be khali.”

He also said that the ES’s talk of rationalising on food subsidies will hit the poor the hardest. Gowda said, “The Thalinomics sets stage for an attack on the poor of India. The Survey talks of rationalising food subsidies at a time when we are faced with low food consumption. NSO’s leaked Consumer Expenditure Survey (2017-18) showed that the average amount of money spent by an Indian in a month fell by 3.7% to Rs 1,446 in 2017-18 from Rs 1,501 in 2011-12. The Survey fails to bring forward any credible solutions towards this pressing problem.”

Supriya Shrinate criticised the ES by pointing out how its past growth projection has turned out to be erroneous. “The growth projection of 6-6.5% made in this Survey is not credible. One look at last year’s projections of 7% growth versus the actual below 5% reality tells us we need to be prepared for even worse fiscal year in FY 2021. Optimism is welcome but the Economic Survey needs to have realistic believable projections,” she said.

Shrinate also warned that the ES was setting stage for Budget announcement tomorrow that Fiscal Deficit will further slip higher.

“This Survey certainly prepares the defence and ground for higher fiscal slippage in the Budget on February 1st. A higher fiscal deficit is likely owing to low revenue and the government’s pitiable efforts to mask the deficit by off-Budget borrowings and irresponsible divestments.”

She also said the ES’s mention of ‘Assemble in India’ was a mark of the government’s lowering ambitions. She said, “The Survey talks about shifting the focus to ‘Assemble in India’ as an alternative to ‘Make in India’. This is a clear admission of failure of the catchy slogan of ‘Make in India.’ This government did not bring in real reform on the ground to make manufacturing growth a reality. Instead, measures like Demonetisation and a hasty GST dealt a blow to manufacturing in India. This is also in contrast to the government is actually doing which is increasing import barriers. The Commerce Ministry, has reportedly also suggested import duty hike across a list of 300 items.”

Saying that anaemic credit growth was draining the economy, Shrinate added, “The Survey talks about sub-scale banks as compared to the size of the economy. The truth is that the government’s priorities regarding public sector banks have been misplaced. At a time when banks should have focussed on investment and boosting credit growth, they have instead been burdened to deal with uncomfortable mergers and which is why NPAs continue to go up and credit growth has crashed. The Survey talks about more sales of homes to clean up banks and NBFC balance sheets. It is ironical and disconnected from reality because at a time when consumption of toothpaste and biscuits has crashed, to suggest people should buy houses is foolhardy.”

She also spoke of the widening trust deficit between the industry and the government. She opined, “The Survey talks about trust which is completely lacking in the present regime. Tax terrorism has peaked, industry is fearful, well-meaning voices have been silenced. The spike in trust deficit has mirrored the widening of fiscal deficit. “

Shrinate tore into the government for unreliability of the data at its disposal. “For the first time, it is not just the government policies which are not being trusted but the credibility of economic data is also under question,” were her exact words.

Pointing out that callous references used in the ES undermined a serious exercise, Gourav Vallabh said, “The repeated reference to Bollywood and callous use of terms like ‘Lutyen’s Delhi’ does not bode well for a serious document like the Economic Survey meant to prescribe policy and present credible data.”

He pointed out that India was witnessing its highest food price inflation in many years at 14.12% and that how the government’s revenues from Direct Taxes and GST were to fall short by as much as Rs 2.5 lakh crore. He also pointed out that manufacturing and construction sector grew their lowest in as many as six years.