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Unlike predecessor Kaushik Basu, Chief Economic Advisor in the finance ministry Raghuram Rajan preferred a graph depicting the global trade share of the major Asian markets -" India, China, Indonesia and Korea -" instead of one based on a theoritical model. The professor of finance, Booth School of Business, University of Chicago, came out with an introduction to the survey for the first time.
The surveys for 2009-10, 2010-11 and 2011-12, prepared by Basu, had academic graphs on the covers.
In his first Survey, Basu depicted a graph showing the coupons equilibrium, which plays a key role in providing micro-foundations for Kenysian macroeconomics. In 2010-11 document had the classic IS-LM diagram, developed by John Hicks to elucidate Keynsian macroeconomics. For the 2011-12 survey, the graph depicted Phillips curves -" short run and long run -" highlighting trade-offs between managing inflation and unemployment.
As if to take the graph given by Basu in his last survey forward, Rajan devoted the whole of chapter two to employment, under the title Seizing the Demographic Dividend; but not through the theoretical way of Phillips curve, but through an explanatory narrative.
The chief economic advisor decides the topic of Chapter 2 of an economic survey. Being a professor of micro economics in the Cornell University, Basu had devoted this chapter to Micro-Foundations of Macroeconomic Policy.
For Rajan, the crucial aspect of today's economic development was a query that disturbs the young -" "Where will my job come from?"
The Rajan Survey said India was creating jobs in industry but mainly in low productivity construction and not enough formal jobs in manufacturing, which typically have higher productivity. "The high productivity service sector is also not creating enough jobs," the survey said, hitting the nail on the head.
In this context, Rajan gave the example of Mauritius. Nobel laureates James Meade and V S Naipaul had prophesied a bleak future for Mauritius when it was assuming self-rule from the British. Through the "Mauritius Miracle", the island nation proved the economist and the litterateur wrong. Mauritius utilised its export processing zones to achieve the miracle, which among other things allowed firms to constantly adjust labour force through lay-offs and realistic compensation.
In these difficult times for India, Rajan portrayed a glimmer of hope, saying, "India has navigated such times before, and with good policies, it will come through stronger." By good policies, he meant the shifting national spending from consumption to investment, removing bottlenecks to investment, growth and job creation.
The Rajan Survey is also 20 per cent thinner -" containing 294 pages (excluding appendix) -" than Basu's Survey of 2011-12, which had 356 pages. This has saved the government Rs 15 lakh. "We want to pull down inflation here as well," quipped Rajan.
In an interview to the Wall Street Journal, Basu had advised Rajan not to waste his energy on small issues and matters, but dig in his heels, quietly but firmly, on a few matters that were important.
The advice came handy to Rajan as he remarked policy makers are usually focused on short-run economic management issues.
"But the short run has to be a bridge in the long run," he said, as he outlined India's challenges -" to create conditions for faster growth of productive jobs outside agriculture, especially in organised manufacturing and in services; even while improving productivity in agriculture.
