Blue sky not necessarily good for India.

Following resignation of Arvind Subramanian, the Economic Survey for 2018-19 was prepared by the new Chief Economic Adviser Krishnamurthy Subramanian who has a PhD in financial economics from the University of Chicago, supervised by Luigi Zingales and Raghuram Rajan, who was the Governor of the Reserve Bank (RBI) until his contract was not extended. Rajan was vilified by ruling BJP members for high interest rate to control retail inflation and for forcing banks to reveal their non-performing assets, or bad loans, which exposed companies which had defaulted on their loans. This is called the twin balance sheet problem, wherein banks cannot lend until they clear up their books and defaulting companies are denied new loans until they clear their dues. The Economic Survey presented by Mr Subramanian "employs unfettered, 'blue sky' thinking to evolve an appropriate economic model for India," with a view to "realising Prime Minister Narendra Modi's vision of a $5 trillion economy by 2014-25". 'Blue sky' is probably meant to indicate optimism but farmers are praying for cloudy skies of southwest monsoon. How will we jump to $5 trillion? "International experience, especially from high growth East Asian economies, suggests that sustained high rate of growth needs a catalytic virtuous cycle of savings, investment and exports supported by a favorable demographic phase." Savings rate has been falling in India over 5 years ending in 2016-17, and household savings fell from 23.6% to 16.3% of GDP. Household savings were 17.2% in financial year 2017-18 (FY18) it was "way below 23.6% savings rate in FY 2011-12". According to the International Monetary Fund, the Chinese savings rate stood at an astonishing 46 percent in 2016, compared to a global average around 25 percent," wrote C Balding. But, the Chinese spend less and save because the state provides less social support than India does. Investment has been declining. Gross fixed capital formation "which means capital expenditures on machinery and equipment and dwellings" fell from 34.31%  in 2011-12 to 28.53% in 2016-17, which means fewer new projects. The current decade has seen few new entrepreneurs but has seen a higher rate of destruction of old businesses, wrote H Damodaran. The Survey suggests giving VIP privileges to high taxpayers which will be just show. Instead, if taxpayers get pensions and free healthcare, like politicians get, everyone will pay at least some taxes even if they do not earn enough. The Economic Survey "failed to provide a correct assessment of the state of the economy, which is its primary objective", wrote Prof Himanshu. "Despite the overwhelming evidence of the economy showing signs of acute distress and growing unemployment, there is neither a diagnosis of where things went wrong, nor an acknowledgement of the challenges of reviving growth." A Barman finds the Survey to be "woolly, irrelevant and of little use". Sunramanian may have learnt from Rajan. Better not to tell the truth.