On August 13, 2015, the Meghnad Desai Academy of Economics hosted Dr. Arvind Subramanian, Chief Economic Advisor to the Government of India, as the inaugural speaker in the Academy’s Speaker Series. Dr. Subramanian’s talk was attended by students and faculty of MDAE and other Mumbai colleges and universities, and was entitled “The Making of the Economic Survey of India, 2014-15.” It consisted mainly of three themes that are present in the current year’s Economic Survey of India, a document that was authored by Dr. Subramanian and presented to the Parliament of India a day before the announcement of the Union Budget in February 2015.
The first theme discussed by Dr. Subramanian was the growth forecast made for the year 2015-16 for India. While forecasting is always an inexact science, this year’s Economic Survey projects a 8-8.5% growth rate based largely on subjective assessments of where the Indian economy stands in 2015, after having experienced 6.8-6.9% growth during the year 2013-14, and 7.3-7.4% growth during the year 2014-15. The pickup in growth from 2013-14 to 2014-15 represented a recovery for the Indian economy from a currency crisis in the year 2013. The Economic Survey conjectures that the pickup in growth from 2014-15 to 2015-16 will be even greater because of three factors – lower oil prices which should generate a wealth effect for consumers and boost domestic demand, good momentum in formulating and implementing economic reforms, and a low-inflationary environment that should cause the RBI to lower interest rates, thereby also boosting domestic demand.
The second theme discussed by Dr. Subramanian was the role of the Economic Survey as a document that not only takes stock of economic developments and makes forecasts for the Indian economy, but also generates ideas. This, Dr. Subramanian announced, was an innovation that the Economic Survey will try to maintain and build on going forward. The new idea that the 2014-15 survey presents is a case for greater public investment. While the case for greater public spending is already being made in many Western, advanced nations since the 2008 crisis by commentators such as Larry Summers and Paul Krugman, the case presented in the Economic Survey is quite different in that it is not inspired by a Keynesian vision of stimulating effective demand in a recessionary environment. Rather, in India, public spending is being urged by the current year’s Economic Survey to help towards improving the balance sheets of banks and corporations, that worsened after the 2000’s boom gave way to a scenario where many large, infrastructure projects that the private sector had invested in were found to have failed. This, Dr. Subramanian, is a unique reason for public investment and is already beginning to have an impact on public policy making in India.
The third theme discussed by Dr. Subramanian was the role of the 14th Finance Commission in advancing the notion of a “competitive federalism.” Traditionally, the notion of federalism in India has meant that the Central Government has collected a portion of the tax revenues raised by Indian states, and then has been advised by the Finance Commission on how to redistribute these revenues among states based on certain criteria. The 14th Finance Commission has taken the innovative step of reassessing these criteria and instituting some new ones based on such factors as the environmental needs of states. Thus, although poorer states and states with larger populations continue to be favored in redistribution, now also states with greater forest cover are benefiting from the Central Government’s disbursements. The 14th Finance Commission also recognizes that states in India have become important agents of change, becoming both “models” of success as well as “magnets” for resources and factors of production. For instance, Gujarat’s success in electricity generation and distribution is an example for other states to emulate. This kind of “competitive federalism” where some states lead the way and demonstrate for other states the path to success is actively facilitated by the new criteria laid out by the 14TH Finance Commission.
In concluding his presentation, Dr. Subramanian urged the students in his audience to become good writers and communicators and he suggested that one way for them to accomplish this objective would be to read extensively, especially texts relating to economic development. He also pointed students to his website, which contains a reading list of such texts.
Following his presentation, Dr. Subramanian fielded questions from students on topics ranging from China’s recent devaluation and the complementary roles of Niti Aayog and the Finance Commission to public procurement reforms and competitive federalism.
Dr. Subramanian’s reading list:
1) Joseph Conrad, Nostromo, A Tale of the Seaboard. 1904. (336 pages) Understanding Development
2) Philip Gourevitch, “Alms Dealers: Can you provide humanitarian aid without facilitating conflicts?”The New Yorker, 2010. Manna and Economic Development: Foreign Aid
3) Jared Diamond, Guns, Germs and Steel, 1997. Geography and Development
4) Giusepe de Lampedusa, The Leopard, transl. by Archibald Colquhoun, 1958 Understanding economic development
Richard Hofstadter, The American Political Tradition: And the Men Who Made It, 1948Formative histories and development
5) Ryszard Kapuściński, The Emperor: Downfall of an Autocrat, 1983[Formative histories and development Ethiopia]
6) Ian Morris. Why the West Rules-for Now: The Patterns of History and what They Reveal about the Future. Picador, 2010.Broad Facts on Economic Development
7) V.S. Naipaul, The Writer and The World: Essays, 2003Formative Histories and Development [Argentina, Mauritius, Guyana, Congo, Cote d’Ivoire]
8) Thomas Piketty, Capital in the twenty-first century, Harvard University Press, 2014.Inequality and Development
9) Michela Wrong, I Didn’t Do It for You: How the World Betrayed a Small African Nation, 2006Manna and Economic Development [Eritrea]
Date(s) - 13/08/2015
4:00 pm - 6:00 pm