CEA to continue pressure for rate cut in Eco Survey's Part-II

Expected on July 22, it could have another detailed analysis on note ban

The second part of the Economic Survey for the financial year is likely to be introduced in Parliament on July 22.

While it will be heavier on data than on commentary compared with the one released on January 31, Chief Economic Advisor Arvind Subramanian might give another critique of demonetisation and could continue rebuking the Reserve Bank of India’s Monetary Policy Committee (MPC) for not cutting interest rates.

He has been a vocal critic of the MPC’s decision to hold rates, over four consecutive policy meetings. His and the finance ministry’s contention is that with headline retail inflation below three per cent, and latest quarterly Gross Domestic Product (GDP) growth just above six per cent, there is no better time for a rate cut.

“The CEA’s views on rates are well known. There will be some detailed commentary on inflation modelling, economic growth, infrastructure lending and consumption, and how all this leads to an immediate need for a rate cut,” said an official aware of the work being put into drafting the Survey.

The Economic Survey this year has an altered structure. In previous years, there was a Part-I with a detailed overview of the economy and outlook for the coming years in the form of commentary. Part-II was mostly numbers and data.

In the latest Economic Survey, formally termed the one for 2016-17, partly due to advancement of the Union Budget for 2017-18, the first part was issued on January 31. This was a day before the Budget presentation. Part-II is expected, as mentioned, on July 22. And, could also contain substantial commentary.

In the January 31 survey, Subramanian’s GDP growth estimates for 2016-17 differed from that of T C A Anant, the government's chief statistician. So much so that the budget makers took some inputs from the CEA’s data for their projections, rather than depend only on Central Statistics Office (CSO) data. This was because Subramanian’s team was able to capture the impact of demonetisation better than the first advance estimates of GDP growth issued by the CSO on January 7.

The latest official data shows the economy grew 6.1 per cent in the January-March quarter, as the full impact of note-ban finally started to show. Officials in the know said even then the CEA believed the full impact had not been captured.

“While the base of the Survey’s projections will be the CSO data, the CEA will be adding to that by studying proxies such as two-wheeler and four-wheeler sales, index of industrial production, consumption of fast-moving consumer goods and other data,” said the official quoted earlier.

So, the CEA’s data on GDP for January-March could again differ from the CSO's. There could also be more in-depth commentary on the subject from the first part.