A survey is an examination of the past. What about the future?

India's annual Economic Survey was presented to Parliament yesterday, in preparation for the Budget which will be presented tomorrow. "The central theme of the Survey is that this is the time for the government to increase expenditure on investment in a big way," wrote an editorial in the Economic Times. "So long as he growth rate exceeds the rate of interest, government debt would continue to fall as a proportion of GDP, that is, debt would be sustainable." The Survey advises the government to be counter-cyclical, meaning that it should spend more even though tax collections will be depressed because of the economic slowdown. This will, it is hoped, create jobs and encourage the private sector to invest, thus creating a virtuous cycle of increasing investment creating more jobs which will increase demand and lead to further addition to capacity. Yield on benchmark 10-year government bonds was 5.95% on 29 January. This is because the Reserve Bank (RBI) has been resorting to all kinds of financial trickery to keep yields down. The RBI refused to sell bonds at bids, it considered too high, on at least 4 occasions last year. It bought long term bonds while selling short term ones, in Operation Twist. And it conducted Long Term Repo Operations (LTRO) in which banks borrowed money from it in exchange for longer term government securities. The RBI has kept interest rate at 4% for months even though consumer price inflation (CPI) has been consistently much higher, the lowest being 4.59% in December 2020, which has devastated savers, especially retired people who depend on bank interest for survival. The government has said that it intends to borrow at least Rs 12 trillion instead of Rs 7.8 trillion envisaged in the budget last year. The government earned Rs 11 trillion till 2018 from excess excise duties on petroleum products. It earned over Rs 3.65 trillion in 2018-19. Even with the decrease in consumption of fuel due to the lockdown the government is to make an Rs 1.4 trillion in this financial year from fuel taxes. In addition, the government forced the RBI to handover Rs 1.76 trillion from its reserves in September 2019. Where have these eye-watering sums of money gone? Will the Finance Minister give us a detailed account in tomorrow's budget? The government borrows vast sums stealthily by getting public sector undertakings to borrow from the public by selling bonds which it does not show in its accounts. GDP growth rate for the financial year 2019-20 (FY20) has been revised down from 4.2% to 4% though the growth rate of FY19 has been raise from 6.1% to 6.5%. Since prices of fuels are not under goods and services tax (GST) higher fuel prices will feed into prices of all goods and services, warned the Economic Times. What happens to inflation if the government increases consumer demand through higher spending? We live in interesting times.