New Delhi: Finance Minister Nirmala Sitharaman on Friday presented the Economic Survey that details the state of the economy ahead of the government's Budget for fiscal year beginning April 1, 2021.
The Economic Survey 2020-21, authored by a team led by Chief Economic Adviser Krishnamurthy Venkata Subramanian, details the state of different sectors of the economy as well as reforms that should be undertaken to accelerate growth.
The economy, which was battered by the coronavirus lockdown, is expected to see a strong recovery in the 2021-22 fiscal year.
The gross domestic product (GDP) contracted by a record 23.9 per cent in April-June and by 7.5 per cent in the second quarter.
For the full fiscal, the survey projected a contraction of 7.7 per cent and V-shaped recovery in the next.
GDP growth is seen expanding by 11 per cent in the 2021-22 fiscal (April 2021 to March 2022).
Highlights of Economic Survey 2020-21:
State of economy amidst once in a century crisis:
* Economic contraction projected at 7.7 pc in FY21
* 11 pc GDP growth projected in FY22, farm sector remains silver lining
* V-shaped recovery supported by COVID vaccination drive
* Rebound to be led by low base and continued normalization in economic activities as vaccine rollout gathers traction
* Govt consumption, net exports have cushioned growth from further diving down
* Exports to decline by 5.8 pc, imports by 11.3 pc in 2nd half of FY21
* India expected to have a Current Account Surplus of 2 pc of GDP this fiscal, a historic high after 17 years
* India's sovereign credit ratings do not reflect its fundamentals, India's willingness to pay is unquestionably demonstrated through its zero sovereign default history
* India's fiscal policy should reflect Gurudev Rabindranath Tagore's sentiment of a mind without fear
Healthcare:
* India's lockdown strategy prevented 37 lakh COVID-19 cases, 1 lakh deaths
* Survey recommends increase in public healthcare spending from 1 pc to 2.5-3 pc of GDP
* India's health infrastructure must be agile to respond to pandemics - healthcare policy must not become beholden to 'saliency bias'
* Telemedicine needs to be harnessed to the fullest by investing in internet connectivity and health infrastructure
Process reforms:
* India over-regulates the economy resulting in regulations being ineffective even with relatively good compliance with process
* The solution is to simplify regulations and invest in greater supervision which, by definition, implies greater discretion
* India's business sector needs to significantly ramp up investments in R&D
* Survey suggests asset quality review exercise immediately after the forbearance is withdrawn
* Forbearance represents 'emergency medicine' that should be discontinued at the first opportunity when the economy exhibits recovery, not a 'staple diet' that gets continued for years
* Legal infrastructure for the recovery of loans needs to be strengthened de facto
Fiscal Developments:
* India adopted a calibrated approach best suited for a resilient recovery of its economy from COVID-19 pandemic impact, in contrast with a front-loaded large stimulus package adopted by many countries
* India remained a preferred investment destination with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies
* Net FPI inflows recorded an all-time monthly high of USD 9.8 billion in November 2020, as investors' risk appetite returned
* India only country among emerging markets to receive equity FII inflows in 2020
* India the fastest country to roll out 10 lakh vaccines in 6 days and also emerged as a leading supplier of the vaccine to neighbouring countries and Brazil
* India's mature policy response provides important lessons for democracies to avoid myopic policy-making.
