India GDP to grow at 11% in FY22; lockdown saved 1 lakh lives: Key points of Economic Survey 2021
The Gross Domestic Product (GDP), however, is projected to contract by a record 7.7 percent in the current financial year ending 31 March, 2021
The annual Economic Survey of India painted an optimistic view of the economic recovery stating that an 11 percent rebound is likely in Financial Year 2021-22 even though the GDP is expected to contract by a record 7.7 percent in the financial year ending on 31 March as a result of the COVID-19 pandemic and the months-long nationwide lockdown.
Detailing the expected recovery path of the economy in the aftermath of the pandemic, the survey also credited the government's "mature and bold" policy measures for a reduced impact of the pandemic on the Indian population and estimated that over 1 lakh lives were saved because of the early imposition of a stringent lockdown.
The Economic Survey, which was presented in both the Houses by Union Finance Minister Nirmala Sitharaman, also criticised global rating agencies for being too subjective in their ratings.
Chief Economic Advisor presented it to the media, going over sector-wise highlights of the document.
Here are some key points from the survey:
Economic rebound likely in FY21-22
India's economy is likely to rebound with an 11 percent growth in the next financial year as it makes a 'V-shaped' recovery after witnessing a pandemic-led carnage, the Pre-Budget Economic Survey said on Friday. The Gross Domestic Product (GDP) is projected to contract by a record 7.7 percent in the current financial year ending 31 March, 2021.
India witnessed its last annual contraction of 5.2 percent in the financial year 1979-80.
"After an estimated 7.7 percent pandemic-driven contraction in 2020-21, India's real GDP is projected to record a growth of 11.0 percent in 2021-22 and nominal GDP by 15.4 percent. These conservative estimates reflect upside potential that can manifest due to the continued normalisation in economic activities as the rollout of COVID-19 vaccines gathers traction," the survey said.
The growth will further be supported by a supply-side push from reforms and easing of regulations, push for infrastructural investments, boost to manufacturing sector through the Productivity Linked Incentive Schemes, recovery of pent-up demand for the services sector, increase in discretionary consumption subsequent to the roll-out of the vaccine and pick up in credit-given adequate liquidity and low-interest rates, it said.
The contraction of 7.7 percent in the current fiscal is on account of disruption in normal activities due to the pandemic.
However, India is expected to be the fastest-growing economy in the next two years, the survey said.
Earlier in the week, the International Monetary Fund projected an impressive 11.5 percent growth rate for India in 2021, making the country the only major economy in the world to register double-digit growth this year amid the pandemic.
Agriculture only silver lining for economy
Lauding the farm sector for demonstrating resilience during the pandemic, the Economic Survey on Friday suggested the government see the farm sector as a "modern business enterprise" for which "urgent reforms" are required to enable sustainable and consistent growth.
India's agricultural sector has shown its resilience amid the adversities of COVID-19-induced lockdowns, the Survey noted.
The agriculture and allied activities were the sole bright spot amid the slide in GDP performance of other sectors, clocking a growth rate of 3.4 percent at constant prices during 2020-21, it added.
According to the Survey, the farm sector has got a "renewed thrust" due to various measures on credit, market reforms, and food processing under the Aatmanirbhar Bharat announcements.
Various interventions of the government for the development of allied sectors including animal husbandry, dairy, and fisheries exhibit its resolve towards tapping the potential of allied sectors to further enhance farm welfare.
India's COVID-19 response saved over one lakh lives
India's pandemic response, focused on saving lives and livelihoods, restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives, as per the Economic Survey 2020-21.
The pre-budget document noted that in the absence of a potent cure or a preventive vaccine, the interplay of network structures in densely populated areas, and a high case fatality rate (CFR), India weighed the costs and opportunities strategically.
"By estimating the natural number of cases and deaths expected across countries based on their population, population density, demographics, tests conducted, and the health infrastructure, we compare these estimates with actual numbers to show that India restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives," it said.
The 40-day lockdown period, it said was used to scale up the necessary medical and para-medical infrastructure for active surveillance, expanded testing, contact tracing, isolation and management of cases, and educating citizens about social distancing and masks.
The lockdown provided the necessary time to put in place the fundamentals of the '5T' strategy — Test, Track, Trace, Treat, and Technology, the survey said.
The survey also sought to establish a causal relationship between the lockdown and the number of cases.
It said that when the stringency of the lockdown in each state was mapped against its cases, there was a clear trend that showed a stricter implementation of lockdown leads to fewer cases of infection. Subramanian also noted that disparities in health infrastructure, population and population density, etc, were taken into account while doing these calculations.
India to log 2 percent current account surplus; first positive balance in 17 years
India is expected to witness a current account surplus during the current financial year after a gap of 17 years, it said. India has recorded a current account surplus of 3.1 percent of GDP in the first half of the year largely supported by strong services exports.
"Given the trend in imports of both goods and services, it is expected that India will end with an annual current account surplus of at least 2 percent of GDP after a period of 17 years," it said.
Credit ratings do not represent India's fundamentals
India's sovereign credit ratings do not reflect the economy's fundamentals, the Economic Survey said on Friday, and nudged the global agencies to become more transparent and less subjective in their ratings.
The Economic Survey 2020-21, tabled in both houses of the Parliament, said that sovereign credit ratings methodology must be amended to reflect economies' ability and willingness to pay their debt obligations, and suggested that developing economies must come together to address this bias and subjectivity inherent in sovereign credit ratings methodology.
"Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment-grade (BBB-/Baa3). While sovereign credit ratings do not reflect the Indian economy's fundamentals, noisy, opaque, and biased credit ratings damage FPI flows," the survey said.
Stating that there is a bias against emerging giants in sovereign credit ratings, the survey said India has been an outlier in terms of GDP growth rate, inflation, general government debt, political stability, rule of law, control of corruption, investor protection, ease of doing business, short-term external debt (as percent of reserves), reserve adequacy ratio and sovereign default history, for the last decade.
Expenditure on social services rises 12 percent to Rs 17 lakh crore in FY21
The combined expenditure of the Centre and the state governments in the social services sector increased to Rs 17.16 lakh crore during the financial year 2020-21, according to the Economic Survey.
At Rs 17.16 lakh crore, the expenditure is 12 percent higher from Rs 15.31 lakh crore (revised estimate) in the financial year 2019-20.
According to the Survey, the budget estimate (BE) on social services in 2020-21 by the general government (combined Centre and states) was at Rs 17.16 lakh crore, of which Rs 6.75 lakh crore was on education, Rs 3.51 lakh crore on health and Rs 6.90 lakh crore on other segments of the sector.
The expenditure on social services sector in 2019-20 financial year was at Rs 15.31 lakh crore, of which Rs 6.13 lakh crore was on education, Rs 3.12 lakh crore on health and Rs 6.06 crore on others, as per the Survey.
Public spending on the social sector was increased in 2020-21 to mitigate the hardships caused by the pandemic and the loss of livelihood due to the lockdown, the Survey said, adding the year 2020 began with the once-in-a-century pandemic and the lockdown imposed to contain the spread of COVID-19 had an inevitable impact on the vulnerable and informal sector, the education system, and on the economy as a whole.
Indian startup ecosystem has potential to be a growth engine
The Indian startup ecosystem, which defied odds during a pandemic-hit year to create record 12 unicorns, has the potential to be the engine of growth in the medium to long run, according to the Economic Survey 2020-21.
The survey noted that startups are the platform for entrepreneurs who have the ability to think out of the box and innovate to conceive products that can create a niche for themselves in a dynamically changing world.
"Startups have the potential to be the engine of growth in the medium to long run... The Indian start-up ecosystem has been progressing well, despite the COVID-19 pandemic. Faced with a myriad of challenges at the onset of the pandemic, the ecosystem defied the odds and had a record number of 12 startups that reached unicorn status," it added.
Currently, India is home to 38 unicorns — startups with a valuation of over $1 billion — as per the Nasscom Tech Start-up Report 2021. The US and China have 243 and 227 unicorns, respectively.
To facilitate the growth of startups, the Indian government had announced the 'Startup India, Stand-up India' initiative. As of 23 December, 2020, the Indian government has recognised a total of 41,061 startups and 4.7 lakh jobs have been reported by more than 39,000 startups.
With inputs from PTI