Economic Survey 2021 Highlights: Chief Economic Advisor (CEA) KV Subramanian on Friday launched the Economic Survey 2020-21, which was presented in the morning by Finance Minister Nirmala Sitharaman. CEA launched a mobile survey of the economic survey. In the press conference, Subramanian said that the first chapter of the Economic Survey Covid-19 is about India’s policies to save lives and livelihoods in crisis. The survey estimated the economic growth rate (GDP) to be 11 percent for FY 2021-22. Let us know about the main points of the Economic Survey 2020-21.
Safety of life and livelihood during centuries of crisis
- After the onset of the Covid-19 epidemic, India focused on the protection of life and livelihood.
- This effort is based on the human principle under which people’s lives cannot be brought back.
- The epidemic led to a decrease in GDP. Recovery in GDP is likely.
- The stringent lockdown, in the beginning, helped protect people’s lives and secure livelihoods. Economic recovery will help in the middle and long term.
- India’s strategy flattened the graph and postponed the peak to September 2020.
- There was a 23.9 percent decrease in GDP in the first quarter, while there was a 7.5 percent decrease in GDP in the second quarter. This shows V-shape recovery.
- The Covid epidemic has affected both demand and supply.
India was the only country to declare structural reforms in order to increase supply so that there was minimal loss of production capabilities.
With the removal of the ban on economic activities, policies were made to increase demand.
Success in stopping the second round of pandemic infection, the economy boomed.
The state of the economy in 2020-21
- Due to the Covid-19 epidemic, the whole world had to face an economic recession. It was more serious than the global financial crisis.
- According to the estimate, the global economic output will be reduced by 3.5 percent in 2020.
- Governments and central banks all over the world supported the economies through various policies.
- India adopted a four-pronged strategy – epidemic control, financial policy and long-term structural reforms.
- Financial and monetary support was given. During the lockdown, the weaker sections were given relief. Consumption and investment were encouraged during the unlocking.
- Monetary policy ensured the availability of cash. The relief was given to the borrowers.
- According to the advance estimate of NSO, India’s GDP growth rate will be 7.7% in FY 2021 (-). There will be an increase of 23.9 percent in the second half as compared to the first half of FY 2021.
- In FY 2021-22, India’s real GDP growth rate will be 11.0 percent and the nominal GDP growth rate will be 15.4 percent, which will be the highest since independence.
- Economic activities have become more common since the introduction of the Covid-19 vaccine.
- The V (size) continues to improve, as has been shown by the steady increase in high volatility indicators such as electricity demand, steel consumption, e-way bill, GST collection etc.
- With the introduction of the vaccination campaign, the economy is returning to normalcy.
- Expectations of improvement have increased with the strengthening of the services sector, consumption and investment.
Does development help to sustain debt?
- In the Indian context, development promotes sustainable credit, but it does not necessarily give momentum to development.
- Remaining a loan depends on the difference between the interest rate and growth rate.
- In India, the interest rate on loans is lower than the growth rate – this is the rule, but the exceptions are different.
- Due to development, debt becomes permanent in countries with high growth rate.
- An active fiscal policy can ensure that the reforms have full benefits by limiting the potential loss of production capacity.
- The fiscal policy that accelerates growth is likely to lead to a reduction in the debt to GDP ratio.
Does India’s sovereign credit rating reveal its basic elements? No!
- The fifth-largest economy in the world has never been given the lowest investment grade (BBB- / BAA3) in the sovereign credit rating.
- The fifth-largest economy in the world has been primarily rated AAA.
- China and India are the only exceptions to this rule – China was given an A- / A2 rating in 2005 and now India is given a BBB- / BAA3 rating.
- India’s credit rating does not show its basic elements.
- There are clear differences in several criteria between countries with ratings between A + / A1 for S&P / Moody’s.
- Due to the impact on the criteria of the sovereign rating, the rating is given very low.
- The method of credit rating should be more transparent, less biased and more systematic, demonstrating the basic elements of economies.
Inequality and development: deadlock or convention?
- The relationship between inequality and socio-economic consequences as well as economic growth and socio-economic outcomes in India is different when compared to developed economies.
- Unlike developed economies, inequality and per capita income (development) in India have a similar relationship with socio-economic indicators.
- Economic development has more impact on poverty alleviation than inequality.
- To keep the poor out of poverty, India should remain focused on economic development.
The main focus should be on health
- The Covid-19 epidemic has revealed the importance of the health care sector and its inter-relationship with other sectors, which shows how a health crisis can turn into an economic and social crisis.
- India’s health infrastructure must be efficient so that it can be responded quickly in the event of epidemics.
- The National Health Mission (NHM) has played an important role in removing inequality in the form of access to care to the poor.
- With public spending increasing from 1 percent to 2.5–3 percent of GDP, public spending on health care is expected to fall from 65 percent to 35 percent.
The formation of a regulator for the health sector should be considered.
Procedural improvements
- Due to higher regulation of the economy in India, comparatively better compliance with the process does not affect the rules.
- The main reason for the problem of excessive regulation is the approach that strives for every possible conclusion.The rules should be simplified and emphasis should be placed on inspection.
- Many reforms have been implemented, ranging from the Labor Code to the removal of excessive regulations applicable in the BPO sector.
Regulatory relief is a treatment, no permanent remedy
- During the global financial crisis, the regulatory relief assistance provided temporary facilities to the borrowers.
- Relief assistance continued for a long time after the economic recovery, causing undue negative effects on the economy.
- Banks used this relief facility to correct their books and misallocated debt, which damaged the quality of investment in the economy.
- Relief aid is an immediate treatment that should be discontinued at the first opportunity for the economy to show improvement, and not continue as a permanent dose for years.
Innovation: Increasing, but more support, especially from private sector, required
- India entered the club of the top-50 innovation countries for the first time in 2020, since the introduction of the Globus Innovation Index in 2007.
- India’s ambition should be to compete with the top 10 economies in terms of innovation.
- This situation persists despite the high tax benefits announced for innovation and access to equity capital.
- India’s business sector needs to substantially increase investment in research and development.
- The participation of Indians in the total patent applications made in the country should be increased from the current 36 percent, while it is much lower than the average of 62 percent of the top ten big economies.
PM’JAY ‘launch and health findings
- Pradhan Mantri Jan Arogya Yojana (PMJAY) – is an ambitious scheme launched in 2018 by the Government of India, which aims to provide health care to the most vulnerable people. This scheme has shown strong and positive impact in the field of health care in a very short time.
- PMJAY was used for the cost-effective treatment of repeated dialysis and continued during the Covid epidemic and lockdown.
- The number of health-insured families in Bihar, Assam and Sikkim declined by 89 percent from 2015-16 to 2019-20, while in West Bengal it declined by 12 percent in the same period.
- Infant mortality during 2015-16 to 2019-20 The rate fell to 20 percent in West Bengal, while it fell to 28 percent in the three neighbouring states.
- When we compare all the states implementing PMJAY with those which did not implement it, we find that all health measures have been equally effective.
Overall, this comparison leads to the conclusion that the states where PMJAY was implemented showed significant improvement in various health outcomes.
Basic needs
- Substantial improvement in people’s access to basic needs has been registered in all the states of the country in 2018 as compared to 2012.
- It was found at the highest level in Kerala, Punjab, Haryana and Gujarat, while it was lowest in Odisha, Jharkhand, West Bengal and Tripura.
- Five areas such as water, housing, sanitation, micro-environment and other facilities showed considerable improvement.
- Inequality in rural and urban areas of all the states of the country has come down, as backward states have benefited greatly from 2012 to 2018.
- The condition of poor families in all rural and urban areas of the country has improved considerably compared to rich families.
- Attention needs to be paid to reduce the gap in access to the basic needs of rural and urban areas and different income groups of all states of the country.
- Schemes like Jal Jeevan Mission, SBM-G, PMAY-G etc. can devise suitable strategies to reduce this gap.
Financial events
- India adopted a specific and appropriate approach to recover its economy from the impact of the Covid-19 epidemic, while many countries adopted large stimulus packages.
- The initial goal of our spending policy in 2020-21 was to provide support and support to the weaker sections, but after the lockdown was over, it was changed to meet aggregate demand and capital expenditure.
- In the last three months since the introduction of GST, the monthly GST collection has crossed the figure of one lakh crore and reached the highest level in December 2020.
Zone out
- The Covid-19 pandemic led to a sharp decline in global trade, lower consumer goods prices and contraction in external financial conditions, which impacted the current account balance and currency of different countries.
- India’s foreign exchange reserves touched an all-time high of US $ 586.1 billion on January 8, 2021. This includes imports made in about 18 months.
- During April-October 2020, total FDI of US $ 27.5 billion came, which is 14.8 percent higher than the first seven months of FY 2019-20.
- The total FPI came to US $ 28.5 billion during April-December 2020 as compared to US $ 12.3 billion in the same period last year.
- India’s merchandise trade deficit narrowed to US $ 57.5 billion in April-December 2020 as compared to US $ 125.9 billion in the same period last year.
- Commodity exports declined by 15.7 percent to US $ 200.8 billion in April-December 2020 as against US $ 238.3 billion in April-December 2019.
- Petroleum, oil and lubricants (POL) exports contributed negatively to our export performance during the period under review.
Wealth Management and Financial Intermediation
- Convenience monetary policy during 2020: The repo rate was reduced by 115 basis points from March 2020.
- The lower policy rates of deposits and borrowings in the financial year 2020-21 led to an improvement in monetary circulation.
- On 20 January 2021, the Nifty 50 reached its highest level of 14,644.7 points and the BSE SENSEX 49,792.12 points.
- The recovery rate of scheduled commercial banks through IBC has been above 45 percent.
Price and inflation
- The consumer price index inflation averaged 6.6 percent during April to December 2020, mainly due to the rise in food inflation to 4.6 in December 2020.
- CPI inflation in 2020 recorded a decrease in the rural-urban gap.
- In November 2019, CPI urban inflation has offset the CPI rural inflation gap.
- In the period from June 2020 to November 2020, the prices of the items included in the food plate increased. However, the sharp fall in their prices in the month of December shows the fall in prices of many essential food items.
- Investing more in gold during Covid-19 led to a steep rise in its prices and this led to economic uncertainties.
- Investment in gold during FY 2020-21 was more profitable than other assets.
Sustainable Development and Climate Change
- India has taken several proactive steps to implement the objectives of sustainable development in policies, plans and programs.
- In order to achieve the objectives included in the agenda of the year 2030, it is very important to implement these objectives at the local level in any strategy.
- Many states / Union Territories have created institutional structures for the implementation of the objectives of sustainable development and have also established a nodal process in each department at the district level for better coordination and adjustment.
- 8 National Missions were established under the National Action Plan on Climate Change (NAPCC) and their main objective is to deal with climate change issues.
- India’s National Commitment Contribution (NDC) says that finance has an important role to play in the Climate Change Action Plan.
- The financial aspects will be very important for the necessary steps taken to achieve these objectives.
Agriculture and Food Management
- India’s agriculture (and ancillary work) sector witnessed resilience amid unfavourable conditions such as the lockdown caused by Covid-19, which grew by 3.4 percent during 2020-21.
- Agriculture and allied sectors accounted for 17.8 percent of the country’s gross value addition (GVA) for the year 2019-20.
- After the budget announcement of February 2020, 1.5 crore dairy farmers of milk co-operatives and milk production companies were targeted for providing Kisan Credit Card (KCC) under the Prime Minister’s Self-reliant India Package.
- By the middle of January 2021, 44,673 Kisan Credit Cards were issued to fishermen and fishermen.
- In the Prime Minister Crop Insurance Scheme, applications of 5.5 crore farmers have been included year after year.
- Claims were settled directly by adding Aadhaar directly to farmers’ accounts.
- 70 lakh farmers benefited and Rs 8741.30 crore was transferred during Covid-19 lockdown period.
Industry and Infrastructure
- A strong rapidly emerging economic activity has been confirmed by the IIP data.
- The broad-based reform of IIP resulted in an increase of (-) 1.9 percent in November 2020, from 2.1 percent in November 2019 and (-) 57.3 percent in April 2020.
- Improvement and strengthening of industrial activities were witnessed with increase in capital expenditure by the government with the commitment to carry out vaccination campaigns and reform measures.
- A self-reliant India campaign was announced with an incentive package of 15 percent of India’s GDP.
- India’s rank in the Ease of Doing Business Index for the year 2019 rose to 63rd position in 2020, which was ranked 77th in 2018 according to the Doing Business Report.
- India improved its position in 7 out of 10 indicators.
- According to the report, India has been accepted as one of the top 10 reformers, the third time in 3 years with 67th rank improvement.
Service area
- India’s service sector remained around 16 percent during H1: FY 2020-21 during the lockdown implemented after the Covid-19 epidemic.
- Key indicators such as the service procurement manager index, rail freight traffic and port traffic all witnessed a steep decline during the lockdown.
- The services sector accounts for 48 per cent of the total exports, more than the exports of goods in recent years.
- The arrival and departure time of ships in ports was 4.67 days in 2010-11 which decreased to 2.62 days in 2019-20.
- The Indian start-up ecosystem is making good progress amid the Covid-19 epidemic, with 12 startups added to this list last year, with 38 startups.
Social Infrastructure, Employment and Human Development
- Social sector spending as a percentage of GDP (center and states) increased in comparison to the previous year in 2020-21.
- India’s per capita GNI (2017 PPP Dollars) increased from US $ 6,427 in 2018 to US $ 6,681 in 2019.
- During the epidemic, online studies and remote working increased the importance of access to data networks, electronic devices such as computers, laptops, smartphones, etc.
- Under the Pradhan Mantri Jan Dhan Yojana, an amount of Rs 500 was directly transferred to the bank accounts of women beneficiaries for three months, for which a total amount of Rs 20.64 crore was spent.
- Free gas cylinders were distributed to about 8 crore families for 3 months.