She has to strike a balance between prudence and populism

Budget for 2023-24 will be presented in less than a week’s time. However, there are additional policy documents such as the Economic Survey which really are a better report card of the country’s economic health and the direction it will take in the medium term.

Last year’s Economic Survey was a clever document which insisted on a “agile approach” in policy response, for an economy facing the downturn and uncertainty of a once in a century pandemic. It was pointed out that some of the elements in the “policy feedback loop” were always present, however, the agility in policy making became the key element with the boom in datasets available to policy makers on a real time basis. Put simply it means policy makers had access to huge swathes of datasets such as digital payments, movement of trucks across highways, railway freight, trade numbers, etc., at the click of a button and it helped them tailor-make policies for a specific sector or target group.

The second theme highlighted in last year’s Economic Survey was the “art and science of policy making during extreme uncertainties.” This was a great attempt to provide a curious person , peek into the minds of the lawmakers. The survey stated “that various policies of the Government of India are all about protection from or taking advantage of an uncertain future.” The uncertainties highlighted were rapid shifts in technology, consumer behaviour, corporate work styles, geopolitical calibration, climate change, etc., in the post-Covid world.

The Economic Survey is a less glamorous document (generally in two volumes) as compared to the Budget, providing diagnosis on the economic health and suggested remedies, or wellness solutions.

The Govt of late, keeping with the times, started to make this document less of a statistical aggregate and more of a short nonfiction novel. This is a welcome change and it would be worth a wait if, Finance Ministry officials and the Chief Economic Advisor, take a cue from information technology ministry colleagues, who have started attaching an explanatory note on all major policy documents. The Economic Survey is not a regulatory policy document, but more of a diagnostics report, written in simple language with ample real-life illustrations, could make it more reader-friendly. Meanwhile, the extreme uncertainties impacting global growth have increased significantly. Last year the economic survey hadn’t factored the ongoing war in Ukraine, which has pushed global growth rates further south. The uncertainty over fuel prices, rapid changes in geopolitical alignments, the heightened threat from non-state actors using emerging technologies such as AI to disrupt critical national infrastructure, slowdown in the US and Europe, post-zero-Covid China, emerging cyber-security challenges, have just been added to the list.

Some of these are sure to find their place in the economic survey for FY 2022-23 and more importantly the final full budget of the Government. The task set out for the Finance Minister and her team is to find a judicious balance between fiscal discipline and populism. She will have to, more than in any other year, present a right mix of political populism while leaving ample trails for the fiscal prudence glide path. To paraphrase PMi’s now famous quote, this is not a time for wasteful expenditure. The spending power of the common household will be the deciding factor for the Finance Minister, as she would like the economy to pick up towards the third quarter, once some of the larger shocks in the global economy have passed. The Govt’s current policy of investing heavily in creating public infrastructure, pushing enterprises and global businesses to set up factories  through various incentives and schemes, thereby creating more skilled jobs are in the right direction. However, persuading the private sector, which is more sensitive to ‘extreme uncertainties’ as a result of global headwinds, to start investing in the domestic economy again, would be critical.

(The author is a foreign affairs commentator)