Unlike most Surveys,Chief Economic Advisor Kaushik Basu did not present an elaborate list of must dos in his signature 294-page document with 125 more pages of annexure. But the Surveys theme is peppered through Finance Minister Pranab Mukherjees Budget for 2010-11. You could see some part of what I was saying in my second chapter Micro-Foundations of Inclusive Growth, Basu told The Indian Express a day after the Budget. Unlike CEAs in the past,Basu,whom the Finance Minster calls by his first name Kaushik,was in the loop through the Budget-making process. The decision to raise income tax slabs was discussed almost two months back, Basu said. Finance Secretary Ashok Chawla confirmed that a call was taken 45 days ago on the move,and in half-jest,added that a journalists sources are no longer good enough. Generally,tax proposals are discussed a few weeks before the Budget is presented. But this time,it seemed North Block had thought it out all too well. The proposal to restructure slabs went to and fro between various departments in the Finance Ministry. There was a lot of discussion by all on this, Basu said. Even the decision to hike excise duty on diesel and petrol by Re 1 a litre seems to have been deliberated at length. When Mukherjee asked Basu to explain the outlook for inflation next fiscal,the CEA said an average inflation of 4 per cent for 2010-11 was realistic despite the excise hikes. The 8.56 per cent inflation that we talk about now is for January. For the full year 2009-10,it will still be comfortably below 5 per cent, he noted. Mukherjee has borrowed some of Basus thoughts as reflected in the Surveys Chapter 2 on Micro-Foundations for Inclusive Growth. For instance,the Unique Identification project (that got a generous Rs 1,900 crore allocation) is a long-term policy measure that will mean a lot for financial inclusion and targeted subsidy payments, Basu said. The concept of coupons equilibrium on the Survey cover,though admittedly more for effect,is the running theme of his signature document. It relates all too well with the food coupon system. The concept itself is not novel and has been talked about by policy makers and even in the Budget,Basu said. But he fully spelt it out,remarkably blending behavioral science with micro-economics. Through the food coupons plan,households should be given the freedom to choose which store it buys the food from. Instead of charging the household less than the market price for wheat or rice,it should be given coupons worth the subsidy which can be used at PDS stores in lieu of money, the Survey said.
