Moved from crony socialism to stigmatised capitalism: Arvind Subramanian

The CEA added that private investment, which had been languishing for so many years, was also likely to pick up this year

The government doesn't have to do anything new and radical, but should look to finish off the policy initiatives it has already implemented, Chief Economic Advisor Arvind Subramanian said on Monday, while talking to the media after the Economic Survey 2018 was presented.

"Eternal vigilance is the price of macroeconomic stability and we need to be more vigilant than ever," said Subramanian.

Highlights of what the CEA said:  

1) We have used a lot of big data provided to us by the government to prepare the Economic Survey. 

2) New policy ideas, analysis and research constitute the second volume of the survey. 

3) Launch of GST was the highlight of the government's economic achievements.

4) Teething challenges in rolling out. Challenges were corrected midway, which led to stabilisation of GST rollout.  

5) Important steps have been taken to resolve the twin balance sheet problem of banks with re-capitalisation, resolution, and reforms. 

6) For the first time in 14 years, India's sovereign ratings have increased in addition to ease of doing business rankings. 

7) In the past four to six quarters, India's economy decelerated while the global economy was expanding. This de-coupling was because of demonetisation and GST. 

8) Demonetisation led to deceleration of exports. Rise of imports due to demonetisation and GST. 

9) Middle of 2016, India's interest rates went up sharply, which adversely affected demand, trade balance, and competitiveness. Real economic activity was also affected, which was different from global trends. 

10) Now there is revival. Manufacturing, GDP, exports, credit offtake have all started picking up. But the level of increase is below potential. 

11) Manufacturing growth of 11.3 per cent is very healthy and exports are now driving growth 

12) Nominal GDP growth will be 10.5 per cent. Real growth next year will be between 7 to 7.5 per cent, which is in line with IMF projections. 

13) Exports are growing in line with global growth. But this is lower than historical export growth. Both export and GDP growth could be higher in the future. 

14) Private investment, which has been languishing for so many years, is also likely to pick up this year. 

15) Factors to watch out for are high oil prices as is currently visible. Every 10 per cent rise in oil prices will reduce GDP by 0.2 per cent and lead to rise in inflation and current account deficit. IMF predicts oil prices will rise by 16 per cent this year. 

16) Stock market correction in India is also looming large but presently they are reflecting the buoyant mood about India's growth beautifully. 

17) In India, we should worry about sudden stalling of capital flows. 

18) The government doesn't have to do anything new and radical but should look to finish off the policy initiatives it has already implemented. 

19) Export refunds and compliance need to be achieved in equilibrium. 

20) We need to privatise Air India. 

21) Eternal vigilance is the price of macroeconomic stability and we need to be more vigilant than ever. 

22) Rise in income tax payers is a boost to the Indian economy.

23) GST collections: Interpreting revenue collections has been misleading. We should compare pre-GST collections with post-GST collections. After making adjustments, this will show that tax collection buoyancy is above historical levels. 

24) Markets are misinterpreting borrowings of state and central governments. 

25) Indian stock market boom: There is no room for complacency at this level of asset prices and we need greater vigilance. 

26) For the first time, we have definite data on the size of the formal sector economy in India, including employment data.

27) Between 30-50 per cent of the workforce in non-agriculture sector in employed in the formal economy. 

28) For the first time, we have data on which states are India's biggest exporters. States which export more are also more prosperous. 

29) To say that India is in a middle-income trap is false. 

30) India's agricultural income could fall by 25 per cent if the weather gets hotter in the country due to climate change. 

31) 'Son meta preference' is a new concept we have studied: The last child is invariably male. Otherwise, it's a female. This is a peculiar trend for India. We estimated that there are 21 million unwanted girl children in India.

32) Research & development in science and technology needs to be taken up in mission mode. If India has to become a big producer of knowledge then R&D needs a big push.  

33) Cooperative separation of power between government and judiciary may be controversial but is an idea worth debating to further usher in ease of doing business. 

34) 'Crony socialism to stigmatised capitalism': Fear that banks could end up favouring the private sector contributes to the twin balance sheet problem. There is a fear that banks would go soft on those who defaulted on loans taken during the infrastructure boom. 

35) Working of GST council has shown that cooperative federalism in India can achieve great results.