From saints to scientists, CEA Krishnamurthy Subramanian digs deep into mankind’s vast knowledge pool in Economic Survey 2021

The COVID-19 pandemic has left a devastating trail of adversity across humanity. The survey seeks to present the scale of challenge in its first chapter itself entitled: “Saving Lives and Livelihoods Amidst a Once-in-a-Century Crisis”.

Subramanian digs deep into the wisdom of the Mahabharata invoking dharma to emphasise India’s approach in dealing with the crisis of epic proportions.

Subramanian quotes Sholka 598 from Chapter 13 of the Mahabharata (Shanti parva): “Saving a life that is in jeopardy is the origin of dharma,” to reason how India’s response stemmed from the humane principle advocated eloquently in the Mahabharata.

India focused on saving lives and livelihoods “by its willingness to take short-term pain for long-term gain”, a strategy that was motivated by the Nobel-Prize winning research of Lars Peter Hansen and Thomas J. Sargent of 2001 that recommends a policy focused on minimizing losses in a worst case scenario when uncertainty is very high.

Time For Some Kalidasa

Does growth lead to debt sustainability? Yes, but not vice versa, the survey says.

It quotes Mahakavi Kalidasa, arguably ancient India's greatest playwright, poet and dramatist to make the point. “The state collects tax for the greater welfare of its citizens in the same way as the sun evaporates water, only to return it manifold in the form of rain.”

Subramanian leans on this shloka 18 from Chapter 1 of Kalidasa’s Raghuvansham to establish that the interest rate the government pays on debt has been less than India’s growth rate by norm, not by exception.

Never in the history of sovereign credit ratings of the fifth largest economy in the world been rated as the lowest rung of the investment grade (BBB-/Baa3).

Do the fundamentals that supposedly drive sovereign credit ratings rationalise this historical anomaly? The survey answers in a resounding “No”, taking recourse to Gurudev Rabindranath Tagore’s Gitanjali to make the point forcefully: “Where the mind is without fear and the head is held high …Into that heaven of freedom, my Father, let my country awake”.

Poverty is an economic concept, while inequality is a sociological construct. An often-repeated concern expressed with this economic model pertains to inequality.

There is a strand of thought that argues that inequality is no accident, but an essential feature of capitalism. This can result in a potential tug-of-war between two opposing objectives: growth versus inequality.

Could the fact that both the absolute levels of poverty and the rates of economic growth are low in advanced economies generate this conflict?

Subramanian seeks support from Greek philosopher Aristotle who once famously said “Poverty is the parent of revolution and crime”. These words have resonated for millennia, demonstrating the symbiotic relationship between poverty levels and growth rates.

That said, the survey notes, given its stage of development, India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie. After all, redistribution is only feasible in a developing economy if the size of the economic pie grows.

The COVID-19 pandemic has catapulted health into the centre-stage of mainstream thinking. A global public health emergency, after all, has pushed economies into deep recession.

The survey quotes the father of the nation and India’s most revered figure Mahatma Gandhi to emphasise its importance: “It is health that is real wealth and not pieces of gold and silver”.

India’s healthcare policy must continue focusing on its long-term healthcare priorities. Simultaneously, to enable India to respond to pandemics, the health infrastructure must be agile.

In another chapter on the government’s Jan Aarogya Yojana, the survey quotes American civil rights icon Martin Luther King Jr: “Of all the forms of inequality, injustice in healthcare is the most shocking and most inhuman”.

Elsewhere in the Survey while analysing sustainable development and climate change, the CEA quotes the Brihadaaranyaka Upanishad: “May all be happy; May all be without disease; May all have well-being; May none have misery of any sort”.

Decision making for accelerating reforms in uncertain times can be hemmed in by a range of “unknowns”. The survey dips into the wisdom of Nobel laureates Kenneth Arrow and G Debreu from their seminal 1954 paper Existence of an Equilibrium for a Competitive Economy  to analyse the complexities.

Financial regulators across the world have adopted regulatory forbearance. India is no exception.

Emergency measures such as forbearance prevent spillover of the failures in the financial sector to the real sector, thereby avoiding a deepening of the crisis.

Therefore, as emergency medicine, forbearance occupies a legitimate place in a policy maker’s toolkit. However, caution must be exercised so that emergency medicine does not become a staple diet because borrowers and banks can easily get addicted to such palliatives.

Moving On To Spanish Philosophy

Subramanian quotes Spanish philosopher George Santayana to strike a note of caution: “Those who do not learn from history are condemned to repeat it.”

India entered the top 50 innovating countries for the first time in 2020 since the inception of the Global Innovation Index (GII) in 2007, by improving its rank from 81 in 2015 to 48 last year.

The Survey examines India’s innovation performance on various dimensions. It quotes the classic Tamil text Thirukural, “If a rare opportunity occurs, while it lasts, let a man do that which is rarely to be accomplished (but for such an opportunity),” calling for fostering a culture of innovation and original thinking.

It again leans on Thirukural in another chapter to describe the state of the economy.

Access to “the bare necessities” such as housing, water, sanitation, electricity, and clean cooking fuel are a sine qua non to live a decent life.

The survey quotes from Rudyard Kipling’s Jungle Book to bolster the argument. “Look for the bare necessities/The simple bare necessities/Forget about your worries and your strife/I mean the bare necessities!”

Fiscal policy in times of such crises involves to nimble footwork and anticipation akin to the practice of martial arts.

The CEA quotes Conor Anthony McGregor, an Irish professional mixed martial artist and boxer, to say it aloud. “Precision Beats Power, and Timing Beats Speed”.

Thiruvalluvar and Eisenstein

COVID-19 has affected nearly all spheres of the global economy but has also presented India with great opportunities in areas such as pharmaceuticals.

The survey quotes from Subhashita, a literary genre of Sanskrit epigrammatic poems: “The air that blows off a small lamp becomes the friend of a jungle fire! Power garners support!”

On agriculture and villages that continue to remain as the core of India’s politico-economic being, Subramanian looks towards the wisdom of celebrated Tamil poet and philosopher Thiruvalluvar who had written: “Who have the shade of cornful crest; Under their umbra umbrella rest”.

There is no gainsaying about the extent of ruin caused to industry during the pandemic. There is, however, a silver lining, which the Survey underlines by quoting Albert Einstein: “In the midst of every crisis, lies great opportunity."