gloomwastheescalatingmultidi-
mensionaltradewarsunleashedby
the DonaldTrumpadministration in
theUnited Statesthatpresenteda
worrying prospectfor Indian ex-
ports.
In all, Subramanianhadenough
on his platebeforehe preparedhis
maidenSurvey.Buthis performance
wasdisappointing.
CLICHESGALORE
Clichesabound in the Survey. Mana-
geriallingo,always a poorandfuzzy
substitutefor macroeconomic logic
andrigour,dominatesthereport
spreadoverthree bulkyvolumes(in-
cluding a statistical appendix).Thus,
we haveSubramanianwaxingelo-
quenton howthe “skyblue”coverof
the Surveyhassymbolicsignificance
because it marks“anunfettered ap-
proachin thinkingaboutthe appro-
priateeconomicmodelfor India”.
However,in keeping with the
overall managerialapproach to eco-
nomics, it simplyassertedthatthe
“unfettered”logicwould enablethe
country to “shift gears”to approach
the targetof makingIndiaa $5 tril-
lioneconomyfor whicha sustained
annual growthof 8 percentwasne-
cessary.Nowhere in the reportis the
smallmatterof howthisgearshift
mayhappenor whatneeds to be
doneto achievethistargetelabor-
atedlet aloneexplained.
Thereis much ironyin thisbe-
causetheSurveyitselfcontainsin-
dications of severalof the structural
problemsthattheIndianeconomy
nowfaces.
Forinstance,private investment,
especiallyinfixedcapital formation,
hasbeensliding duringthecurrent
decade. Between2011-12and2017-
18, privateinvestmentinfixedcap-
italformationhas declined by a
whopping six percentagepointsof
GDP.
Overallcapitalformationin the
Indianeconomyhasalsoslidby a
roughlysimilar magnitude, which
indicates thatinvestment is plagued
by structural problems thatcannot
be attributedmerelyto an adverse
lendingenvironmentor to highin-
terestrates.
Theobsessionwithreiningin the
fiscaldeficit,has,meanwhile, ruled
outanyscopefor the governmentto
intervene countercyclically by in-
vestingimaginatively in orderto a
sparka recoveryin theinvestment
climate. Insteadof frontallyaddress-
ingtheissueof a demand crisis,
whichis whatthe declinein agricul-
turalincomes and thefailure of
privateinvestmentin industry indic-
ate,Subramanianregurgitatesthe
familiar argumentthatIndianeeds
to go on thepathtrodby theEast
Asiantigersdecades ago.
Theadvocacyof sucha pathis not
onlyutterlyahistoricalbutpaysno
attention to thefactthattheworld
hasmoved on in a significantlydif-
ferenttrajectorysincethisglibasser-
tion was made more than two
decades agoin India.
ThisSurveymarksa significant
departure fromtheexercisesof the
past.TheEconomicSurvey hasgen-
erallyrestedon somemodelof eco-nomicrationale. Onemaydisagree
withthe logicof the articulation,but
it wasgenerallyaccepted thatsome
formof economic reasoning waspart
of the framework. Subramanian’s
Surveyis quitedifferentas it exalts
vacuousnessto a virtue.
Considerthis:“Wedepartfrom
traditionalthinkingby outlining a
growthmodel thatviewstheeco-
nomyas being in constantdisequi-
librium—avirtuous cycleor a vicious
cycle.Whenthe economy is in a vir-
tuouscycle, investment, productivity
growth,jobcreation,demandand
exportsfeedintoeachotheranden-
ableanimalspiritsin the economyto
thrive.In contrast,whentheeco-
nomyis in a vicious cycle,modera-
tionin thesevariablesdampeneach
otherandtherebydampenthean-
imalspirits in theeconomy.” What
doesonemakeof thisinanitythat
passesoff as a policyresponseto the
graveproblems plaguing the Indian
economy?
So, Subramaniangoeson andon
abouthowinvestmentis the“key
driver”andhowit needs to be placed
on a “self-sustaining virtuous cycle”.
Heoffersa ratherstrangecompar-
isonwithChina,arguingthatgrowth
wouldoccurif onlyIndiacanget
savingsandinvestment on an up-
swing.Thisassertionhasno basis in
logicfor severalsimplereasons.
Forone,neither the Asiantigers
norChinahada passivestatethat
watched from the sidelines forCHIEF ECONOMICADVISERKrishnamurthySubramanianat a news
conferenceon the EconomicSurvey 2018-inNew Delhi, on July 4.T.NARAYAN/BLOOMBERGManageriallingo,a
poorsubstitute for
macroeconomic
logicandrigour,
dominatesthe
report.