The Survey is peppered with quotes from ancient philosophers, iconic litterateurs, Nobel laureates, modern-day politicians and sacred writings from holy texts, including the Bhagvad Gita and Rig Veda.
Scriptures are not just about abstract moralising. Poetry is not only for those with an abiding interest in literature. Why should ancient treatises be restricted to the realm of academics? Trust is not just a human psychological phenomenon.
There are deep lessons that modern day policy wonks can lean on to explain complex economic problems.
And that is what India's Chief Economic Adviser KV Subramanian did in the Economic Survey 2019-20.
The 21 chapters in the twice-prefaced two-volume lavender-hued survey are peppered with words of wisdom from ancient philosophers, saints, iconic litterateurs, Nobel laureates, modern-day politicians and writings from holy texts.
Wealth creation, through legitimate means, should come with a degree of pride, and not as an act of apology. Subramanian’s discomfiture with the cynics is obvious.
"Given India's "tryst" with Socialism, skepticism about the benefits of wealth creation is not an accident. The Survey documents that ideas of wealth creation are rooted in India’s old and rich tradition ranging from Kautilya’s Arthashastra to Thiruvalluvar's Thirukural, which emphasises ethical wealth creation as a noble human pursuit".
The Survey uses ancient literature and contemporary evidence to drive home the point that India’s dalliance with socialism–a few decades is after all ephemeral in a history of ancient civilization–is an exception, with belief in the “invisible hand” of markets being the norm.
The Survey presents Contours of the World Economy I-2030 AD, a pioneering book by Angus Maddison, a leading British economist specialising in quantitative macroeconomic history, to buttress the argument that India has been the dominant economic power globally for more than three-fourths of known economic history.
"Such dominance manifests by design; not happenstance," it says.
In a chapter on Wealth Creation: The Invisible Hand Supported by the Hand of Trust, Subramanian quotes Thirukural, a classic Tamil language text of 1,330 couplets or Kurals, twice thus: “Wealth, the lamp unfailing, speeds to every land, dispersing darkness at its lord's command” from chapter 76, verse 753 and “Make money—there is no weapon sharper than it to sever the pride of your foes” from chapter 76, verse 759.
India's traditional economic thinking has always emphasised enabling markets and eliminating obstacles to economic activity. The survey dips into wisdom of Kautilya, who postulated the role of prices in an economy several times, quoting him liberally.
"The root of wealth is economic activity and lack of it brings material distress. In the absence of fruitful economic activity, both current prosperity and future growth are in danger of destruction. A king can achieve the desired objectives and abundance of riches by undertaking productive economic activity".
Kautilya advocates economic freedom by asking the king to “remove all obstructions to economic activity”.
The survey pulls no punches in taking critics who present Kautilya as the Machiavelli of India, based on a partial reading of the Arthashastra and selectively quoting sections on spies and internal/external security.
The Arthashastra literally means The Treatise on Wealth and it extensively discusses issues ranging from urban governance to tax administration and commerce.
The book explicitly presents its intellectual framework right in the beginning, stating that good governance is based on the following branches of knowledge: Varta (economic policy), Dandaneeti (law and enforcement), Anvikshiki (philosophical and ethical framework) and Trayi (cultural context).
"The importance of Anvikshiki in Kautilya’s writings is often ignored but is critical to understanding his worldview."
This mirrors Adam Smith who did not just advocate the “invisible hand” but equally the importance of "mutual sympathy" (ie. trust). The same idea is reflected in the writings of Friedrich Hayek, who advocated not only economic freedom but also a set of general rules and social norms that applies evenly to everyone.
"Aristotle's, Confucius' and Kautilya’s notions may seem quaint in a 21st century worshipping self-interested greed. Yet, the events leading to and following the global financial crisis clearly demonstrate that the intrinsic motivation to be "trustworthy" can generate trust as a public good while the intrinsic motivation of uninhibited greed can debase the same public good of trust,” it says.
The chapter Entrepreneurship and Wealth Creation at the Grassroots, too, quotes Thirukural, Chapter 76, verse 753, to reinforce the need for creating a culture of entrepreneurship at the district levels. “The one who utilizes all resources and opportunities at hand is an efficient (entrepreneur) and nothing is impossible for him to achieve.”
In a separate chapter on Pro-Business versus Pro-Crony, where the survey makes a case for tailoring policies for free enterprises to flourish as opposed to favouring specific private interests, the CEA quotes Milton Friedman, Nobel laureate and the most celebrated monetarist of the modern era.
"There is a common misconception that people who are in favour of a free market are also in favour of everything that big business does. Nothing could be further from the truth," the Survey quotes from Friedman.
The survey also cites Austrian economist Joseph Schumpeter, who described creative destruction as a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one", to bolster the argument on policies that foster innovation rather than cronyism.
Subramanian also quotes former RBI Governor Raghuram Rajan and Luigi Zingales's book Saving capitalism from the Capitalists, warning against the dangers of regulatory capture by private interests.
And how can a comprehensive report card on the world’s fifth-largest economy be complete without the wise words of John Maynard Keynes, arguably the discipline’s most fêted practitioner? Subramanian’s survey cites Keynes’s ground-breaking The General Theory of Employment, Interest and Money in a chapter on Undermining Markets: When Government Intervention Hurts More Than It Helps.
No discourse on economic thinking can be complete without drawing from the knowledge of Adam Smith. “Every man lives by exchanging” says the survey, championing the virtues of networking in a chapter on Creating Jobs and Growth by Specializing to Exports in Network Products.
The CEA takes refuge in Kautilya's wisdom several times. "The King (i.e., the State) shall promote trade and commerce by setting up trade routes by land and by water, and establishing market towns and ports," he quotes from the Arthashashtra in a chapter on Targeting Ease of Doing Business.
He leans on Smith again. "It is not by augmenting the capital of the country, but by rendering a greater part of that capital active and productive than would otherwise be so, that the most judicious operations of banking can increase the industry of the country," in an assessment on Golden Jubilee of Bank Nationalisation: Taking Stock.
India’s shadow banks, or NBFCs, which have struggled to stay solvent amid a piling rubble of collapsing asset values and growing loan defaults, come in for special attention.
And CEA chose the Shrimad Bhagvad Gita to explain the factors at play. "Creating sustainable systems requires a good understanding of the basic principle of mutuality and inter-dependence," the survey quotes the Gita in a chapter on Financial Fragility in the NBFC sector.
There are few practitioners better than Margaret Thatcher to talk about Privatization and Wealth Creation. "Free enterprise has enabled the creative and the acquisitive urges of man to be given expression in a way which benefits all members of society. Let free enterprise fight back now, not for itself, but for all those who believe in freedom," the Survey quotes the former British Prime Minister to bolster the need for prudent divestment of state-owned enterprises to create value.
India's official statistics have been a subject of debate, with its credibility questioned by many experts, including Subramanian’s predecessor Arvind Subramanian.
The CEA refers to an anonymous quote "Correlation is the basis of superstition and causation the foundation of science" to answer the big question: Is India's GDP Growth Overstated? No!
Has a Thali become more or less affordable? Has inflation in the price of a Thali increased or decreased? Is the inflation the same for a vegetarian Thali as for a non-vegetarian one? Is the inflation in the price of a Thali different across different states and regions?"Come hitherward to us, O Food, auspicious with auspicious help, Health-bringing, not unkind, a dear and guileless friend,” the survey cites the Rig Veda in a chapter on Thalinomics: The Economics Of A Plate Of Food in India – an attempt to quantify what a common person pays for a platter across India and arrive at a simple cost of living index of sorts.
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