‘Need For Wealth Creation’: Lessons From Thirukkural, Arthashastra And Ten New Ideas In Economic Survey 2020
The Economic Survey 2019-2020 (ES 2020) has been released today by the Chief Economic Advisor (CEA) K V Subramanian.
In his speech, the CEA said that the theme of ES 2020 is wealth creation. He quoted Prime Minister Narendra Modi’s Independence Day speech in which he had asserted that wealth creators need to be respected.
Since wealth cannot be distributed unless created, the wealth creators are India’s wealth, Prime Minister Modi had said.
Subramanian said that the cover of the ES 2020 was in the colour lavender - similar to that of the new 100 rupee new note. This, as well as the rupee symbols captures the same theme of the synthesis of old and new ideas, he said.
Current slowdown
KVS said that the slowdown was partially due to the global headwinds. As all countries experienced a slowdown, India also felt the effect.
He also brought attention to the role of the financial sector.
The data showed that the share of corporate credit in non-food sector peaked in 2013 then decreased consistently except for a small period in 2018.
The analysis of this decline showed that the firms which borrowed a lot from 2008 to 2012 actually invested very less from 2013 to 2017.
KVS said that the virtuous cycle depends on private investment, and the slowdown since 2017 was a combined result of the low private investment due to credit decline since 2013, as well as a 4-year-lag effect that the investment has on the growth.
Emphasis on wealth creation
KVS said that the wealth is both a cause and an effect of the investment. Therefore, it is important to focus on wealth creation.
He pointed out that India had dominated the global GDP for close to three-quarters of the recorded economic history (1 AD to 2018).
“Such dominance doesn't happen by mere chance. It happens by design” he said, adding that such design means wealth creation. He further explained that it was the invisible hand of the market combined with the visible hand of the trust that constitutes this design.
He also said that one of the four purusharthas was artha, or wealth, and that many works of the ancient literature called wealth creation a noble pursuit.
He quotes from Arthashastra: “The root of wealth is economic activity and a lack of it brings material distress. In the absence of fruitful economic activity, both current prosperity and future growth are in danger of destruction”.
He also quoted a verse from the Thirukkural: “Wealth, the lamp unfailing, speeds to every land, dispensing darkness, at its Lord’s command”.
Ten new ideas in Economic Survey 2020
KVS summarised the ten new ideas of the ES 2020 a follows:
- Wealth creation benefits all
- The invisible hand of the market enables wealth creation
- Grassroots entrepreneurs indeed create wealth in their districts
- Trust is a public good, that gets enhanced with greater use
- Pro-business policies, those that provide equal opportunity, are important for wealth creation
- Removal of anachronistic government interventions
- Job creation can be furthered significantly by integrating “Assemble in India for the World” into Make in India
- EODB should be enhanced to bring India into top 50 in the World Bank rankings
- Banking sector is sub-scale compared to the needs of the economy
- Thalinomics - bringing economics closer to the common people
Wealth creation benefits everybody
KVS showed that wealth created by the top 100 Forbes entrepreneurs in the last ten years had positive correlations with various aspects of society.
He said that as the wealth created increases, the employees and other also benefit from the salary increase and other perks. Those firms that supply to the firms of these entrepreneurs, also benefit.
Foreign exchange revenues, direct taxes that go to the government also show a positive correlation.