Understanding the nuances of Pre-Budget Economic Survey

In a way, the Economic Survey is the Pre-Budget document that sets the context and the tone for the Union Budget presentation. Normally, the pre-budget Economic Survey is presented in the Parliament a day before the Union Budget presentation.

Nothing official about the Economic Survey

Unlike the Union Budget, which is a mandatory official document that has to be voted on in Parliament, the Economic Survey is just a statement in retrospect with appropriate prescriptions and projections. The pre-budget Economic Survey presents detailed and comprehensive information about the Indian economy over the past year.

The Economic Survey offers insights into key macros like GDP, Inflation, fiscal deficit, current account deficit, industrial production, agricultural output etc. The Indian Constitution does not bind the government to present the Economic Survey and it has just become a standard practice of the government to present the same ahead of the Union Budget.

Historical anecdotes about the Economic Survey

Did you know when was the first Economic Survey presented? Interestingly, the Economic Survey has been presented each year since India became a Republic in 1950. The first Economic Survey was presented ahead of the Budget presentation by John Mathai, the first finance minister of the Indian Republic, in 1951.

In the first phase between 1951 and 1964, the Economic Survey was presented as part of the Budget document. In the 1964 Union Budget, when Morarji Desai was the Finance Minister and Jawaharlal Nehru the Prime Minister, it was decided to make the Economic Survey a separate document, distinct from the Union Budget. Since then, this practice has been followed consistently of presenting the Economic Survey prior to the Union Budget.

Economic Survey presents a comprehensive document of the year gone by with relevant prescriptions, to act as a precursor to the Budget. In 2018, the Economic Survey was given a facelift by then Chief Economic Advisor (CEA), Arvind Subramanian. Not only was the document in pink colour in support of gender equality, but the Economic Survey was embellished with interesting quotes and key information with High Frequency Data.

Who prepares the Pre-Budget Economic Survey?

Economic Survey sets the tone and the context for the Union Budget announcements. The Survey outlines the broad trends of various sectors and also tracks the state of the economy in the past year. The Economic Survey showcases the key challenges and the road ahead. The massive volume of data  flows  come from various departments and ministries.

The Economic Survey is prepared by the Economics Division of the Department of Economic Affairs (DEA), Ministry of Finance. The Chief Economic Advisor collates the data from various ministries and the team under his guidance prepares the report. In a way, the Economic Survey is authored by the Chief Economic Advisor (CEA). The general practice is that once the Economic Survey is prepared under the guidance of the CEA, with all data, charts, tables and analysis; the document has to be approved by the Finance Minister.

Economic Survey 2022 will be shorter and crisper

The Economic Survey underwent a shift after Arvind Subramanian took over as the Chief Economic Advisor in 2018. Since 2018-19, the Economic Survey has been divided into 2 parts. The first part (Volume 1) predominantly focusses on research and analysis of the challenges facing the Indian economy with outlook and prescriptions. The second part (Volume 2) provides detailed insights into key macros and all sectors of the economy.

The Economic Survey became a 2-volume report after Arvind Subramanian took charge as CEA in 2018. After his resignation, his successor, K V Subramanian, continued the practice of presenting a 2-volume Economic Survey. However, after K V Subramanian resigned in October 2021, India has not had a full-time Chief Economic Advisor. Hence the 2-Volume practice is being done away for 2022. The Economic Survey 2022 will contain one Volume which will include the data for the fiscal year across various industry verticals. However, the Economic Survey will not contain policy prescriptions, normally contained in Volume 1.

While this is a make-shift arrangement for this year, it could be a signal to revert to the system of presenting a single volume of past year data. After all, the Economic Survey is supposed to provide data and analysis to set the context for the Union Budget. In the process of providing guidance and prescriptions; optimism must not cloud data analysis.

Why is the Economic Survey important?

The Economic Survey is material as it apprises people about the state of the economy and how various sectors are contributing to overall economic growth. The growth data also shows how the various policies of the government are impacting people economically and socially. It is an authentic and one-point reference for all economic data including money supply, infrastructure, agricultural, industrial production, jobs, prices, exports, imports, forex reserves along with the underlying time series trends. It sets the Budget context.

When will the FY22 Economic Survey be presented?

This year the Budget Session starts on 31st January and the Union Budget will be presented on 01st February. So, the Economic Survey will have to be mandatorily presented on 31st January 2022 in Parliament. However, the Economic Survey this year is expected to be more of a matter-of-fact document focussing more on a review of the Indian economy for the year gone by.