When policymakers look at sky for clues: India’s “blue skies” vs World’s “no clear skies”..

The economic policymakers are increasingly looking up to the sky for guiding economic policy.

The Economic Survey for 2018-19 was all around the colour blue. The Survey points to Blue Sky thinking and even kept the colour of the survey as blue. The Preface explains:

Imbued by the power of the opportunity that beckons, the team for Economic Survey 2018-19 has been guided by “blue sky thinking.” The Survey adopts an unfettered approach in thinking about the appropriate economic model for India. This endeavour is reflected in the sky blue cover of the Survey. To achieve the vision of #Economy@5trillion, India needs to shift its gears to accelerate and sustain a real GDP growth rate of 8%.

The Survey departs from traditional thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium. Rather than viewing the national priorities of fostering economic growth, demand, exports and job creation as separate problems, the Survey views these macroeconomic phenomena as complementary to each other. The cover design captures the idea of complementary inter-linkages between these macroeconomic variables using the pictorial description of several inter-linked gears.

Hmm.. Good friend Avinash Tripathi points how the color of ES changed from pink to blue.

Indian Policymakers often look to skies. RBI’s former Governor D. Subbarao had remarked how he looked up to skies as IAS officer and continues to do so as RBI Governor, anticipating and hoping for a good monsoon. However, he would have preferred grey skies than blue!

As Indian skies look blue, we cannot say the same for World economy skies. BIS in its Annual Report for 2018-19, says there are no clear skies:

The skies are not clear yet. The path is narrow and winding. But the means to negotiate it exist. They should be deployed.

A number of policy implications flow from this diagnosis. For clearer skies to appear, the policy mix needs to be rebalanced. Higher sustainable growth can only be achieved by reducing the reliance on debt and reinvigorating productive strength. In the process, this would relieve some of the burden monetary policy has been bearing since the GFC and avoid the expectation that this policy can be the engine for sustainable growth. Its more appropriate role is that of a backstop, given that its main focus is delivering price stability while supporting financial stability.

There is a whole chapter on no clear skies..

BIS chief, Agustin Carstens in his remarks points to navigating through the skies:

Clear skies may be over the horizon, but we have yet to cross it. Many risks and vulnerabilities exist, and political uncertainty is high. The course towards normalisation has called for some deviations. A sustainable flight path requires the long-overdue full engagement of all four policy engines, rather than short-term turbo charges. By taking a longer view, one can better balance the needs of today with the needs of tomorrow.

Hmm..

 

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