Style of explaining issues is lucid and ordering of thoughts on the state of economy clutter-free.
The Kaushik Basu touch can be seen right on the cover of the pre-Budget Economic Survey for 2009-10. The 420-page document, tabled in Parliament on Thursday, has on its cover a diagram depicting the concept of “coupons equilibrium”, a theory that plays an important role in providing the micro-foundations for Keynesian macroeconomics.
An illustration of two triangles crossing each other, with values placed against them, is a clear signal that the chief writer of this year’s Survey is none other than eminent economist and Cornell University Professor, Kaushik Basu. In the past, we either got the foreboding nothingness of a blank page, or a collage of pictures depicting development.
Basu joined the Union government as its chief economic advisor in December and the Economic Survey for 2009-10 is the first major document he has produced in his new job. Predictably, the Survey for this year departs from the previous ones in many ways.
The approach to the first two chapters marks a refreshing change. A lucid style of explaining issues, clutter-free ordering of thoughts on the state of the Indian economy, and precise outlining of measures needed to place the economy in a higher growth trajectory leave no one in doubt that Basu was at work.
The second chapter has been rechristened. In the last few years, it was called “Challenges, policy responses and medium-term prospects”. Under Basu, it has become “Micro-foundations of inclusive growth”. It suggests that Basu had already internalised the new economic mantra of the United Progressive Alliance (UPA) government under his teacher, Prime Minister Manmohan Singh. Economic reforms now have to be justified on the grounds of achieving inclusive growth!
The change is not just in the naming of the chapter. Unlike his predecessors, Basu was not interested in running a laundry-list of reform measures that the government must implement. He focuses only on a few big-ticket reform measures that the government must implement.
One is the adoption of the “coupons system” to transfer direct subsidies to the poor and the needy farmers. This, he argues, can be achieved with the help of the Unique Identity Numbers, work on which has already begun. He wants the Food Corporation of India to adopt a more flexible approach to intervene in the markets to check food prices and put in place standard operating procedures for market intervention. Another suggestion is suitable changes to the labour law to make it more flexible — in tune with business cycles. All these steps, he argues, would be necessary ingredients of an “enabling government” that can achieve inclusive growth.
The chapter on the external sector has been split into two — one on balance of payments and the other on international trade. The content in these two chapters, however, remains largely unchanged from the previous Surveys, though several new cross-heads have been introduced between paragraphs for easy reading.
The last time the writer of the Economic Survey came completely from outside the government system was in 1991-92, when Ashok Desai wrote the annual document. Desai produced the Economic Survey for 1991-92 in two parts: The first part, General Review, was completely written by him, along with interesting charts and tables. The second part contained all the usual chapters on different sectors and the tables on statistics. The changes in Desai’s Survey were limited to the first part he introduced.
Basu attempted no such separate section. Instead, he tried to present a more comprehensive and better-written document. A quick look at this year’s Survey also shows that Basu has problems with challenges. Normally, all chapters in the Survey end with a section on challenges and outlook. Basu only focuses on the outlook for the first three chapters on the economy, micro-foundations of inclusive growth, and fiscal development and public finance. Challenges, however, resurfaced in all the subsequent eight chapters. And for the chapter on balance of payments, Basu only talked about challenges in the last section!
There are two more Basu gems in the Survey document. The second chapter bemoans how “hard-nosed Government documents” make no mention of the role of social norms and culture in promoting development and economic efficiency. The Survey therefore underlines the role of such non-economic foundations of economic prosperity. Earlier, in the same chapter, the Survey notes that there is a lot of “talent in the Indian bureaucracy”, but the problem lies in the conception of the state and in “the rules, regulations and procedures inherited from our colonial times”.
There is nothing in the Survey on disinvestment.
