What the Economic Survey says
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Ahead of the Budget, the Economic Survey report presented by Union Finance Minister Nirmala Sitharaman, while expressing optimism about the country’s overall economic growth, also reveals certain concerns in its details. Therefore, unlike in the past, the new Economic Survey report is significant for several reasons. Generally, the Economic Survey reflects the government’s thinking about the country’s economic environment and its approach to politics as well. Naturally, this is reflected in the Budget too. When we look at the current state of the country’s economy at a broad level, the various figures in the Economic Survey report suggest that the situation can be considered satisfactory. Economic growth is expected to reach around 7.2 per cent, and inflation, meanwhile, remains under control. Things appear to be moving forward when examining the balance sheets of corporations and various banks. It can also be expected that further rationalisation of GST rates and the signing of various trade agreements will give a boost to economic growth. However, when the issue is examined a little more closely, clouds of concern seem to be looming in many areas. Several trends that undermine the confidence of the ruling establishment are clearly visible. The situation is such that one cannot say the private investment cycle has improved; exports are also slowing down. The agricultural sector has recorded a decline of 1.5 per cent, while growth in the industrial and services sectors is only marginal. Overall, a weakness is evident in household consumption.
Another cause for concern is the depreciation of the rupee and the withdrawal of foreign investors from the market. How the central government responds to all these trends will determine the nature of the Budget that is set to be presented in the coming days. It is also noteworthy that the Economic Survey report reflects emerging signs of change in global geopolitics and the manner in which their economic and diplomatic reverberations have been felt in India as well. The “trade war” and the aggressive policies of U.S. President Donald Trump, along with the Russia–Ukraine conflict, have affected the global economy in multiple ways. India has had to pay a price in three ways due to Trump’s political policies: first, the imposition of U.S. tariffs on imports stalled the export sector; second, circumstances arose that made it difficult for Indians to remain in the United States; and third, India was compelled to reduce oil imports from Russia and instead increase imports from the United States. It goes without saying that all this has significantly affected the Indian market. The mass withdrawal of foreign investors from the stock market in the current financial year can be read in this context. Investments worth ₹35,500 crore were withdrawn in this category alone. In addition, the inability of India, under the present global conditions, to put forward a strong AI policy and related programmes, as well as the flow of capital into safe investments such as gold, are further causes for concern.
The survey report does not clearly state what remedies exist for these complexities, nor can one realistically expect some formula to emerge through the Budget. The survey report looks with hope at the trade agreements India has signed with the European Union and a few of its member countries. However, it remains to be seen whether these will yield tangible outcomes. Meanwhile, the Economic Survey report contains some reassuring points with regard to Kerala. Certain achievements of the Pinarayi government in Kerala have been presented in the report as model initiatives. Undoubtedly, the Left government has reason to take pride in this. The model projects highlighted are the extreme poverty eradication programme and the Kochi Water Metro. The report also carries a note of self-criticism, stating that several components of the Kerala model, such as the low infant mortality rate, deserve to be emulated. At the same time, the report hints at some potentially dangerous moves that the central government may implement in the near future. One such suggestion is that the Right to Information Act has become a burden and that an alternative along European lines is needed. The reality is that the Modi government has already rendered this law largely ineffective. It is reasonable to suspect whether the government now plans to strip away whatever little life remains in it. The reference to “fiscal populism” in the report is not so innocent. Through this term, the report criticises state governments for announcing direct cash assistance schemes without conditions. This is a clear reference to social security pension schemes and similar programmes being implemented in states including Kerala. The argument is that such schemes undermine economic stability in the long run. The report further blames these programmes for the increase in the debts of states. However, the bitter reality of why states like Kerala are forced to borrow is well known—it is solely due to the Centre’s financial hold. The Centre has come forward with the strange argument that such welfare schemes are unnecessary, even while deliberately concealing this fact. It is also surprising that, in the sections of the report dealing with employment, there is no mention at all of the employment guarantee scheme. Regardless of what it is called, does this indicate that the Modi government is planning to do away with the employment guarantee programme as well in the days to come?
