Economic Survey 2019: All You Need To Know
This is a roundup of the key highlights from the Economic Survey 2019.
A Rebound In The Economy?
India expects economic growth to rebound from a five-year low without sacrificing budget goals, as it pins hopes on political stability to revive demand and investments.
- Real gross domestic product growth for the fiscal year started April 1 is projected at 7 percent, the finance ministry said in its annual Economic Survey report.
- The upside and downside risks to growth are evenly balanced, with monsoon rainfall seen tipping the scales, it said.
- The growth push wouldn’t come at the cost of undermining fiscal deficit goals, Krishnamurthy Subramanian, the report’s author and chief economic adviser, told reporters on Thursday.
Here’s what else the Economic Survey has to say about the state of the economy.
How To Spark India’s ‘Virtuous Cycle’
The government’s Economic Survey 2019, presented a day ahead of Union Budget 2019, pins its hopes on a revival in private investment to help spark-off a ‘virtuous cycle’ for the Indian economy.
- India has struggled with a lack of private investment for the last few years due to overcapacity, excess leverage of corporate balancesheets and reduced capacity within the banking system to lend.
- The Survey, just like the one presented in 2018, suggests an urgent need to revive private investment.
- India also needs to move away from attempting to solve key problems, such as job growth, demand, exports and economic growth, separately. Instead, it should find a central catalyst, which pushes the economy into a virtuous cycle.
This catalyst, according to the Survey, is private investment.
Helping Smaller Businesses Go Big
‘Dwarf’ micro, small and medium-sized enterprises, that have less than 100 workers, need to be incentivised to grow into larger firms in order to help increase productivity, according to the Economic Survey 2018-19.
- Policies over the last seven decades have stifled MSME growth in the economy and has kept these dwarf firms at the same size, the survey pointed out.
- Nearly half the micro, small and medium-sized enterprises have less than 100 workers and do not contribute much to India’s productivity compared to larger firms, it said.
- These dwarf MSMEs contribute 8 percent to productivity and account for 14 percent of the employment, according to the economic survey.
Policies must, therefore, focus on unshackling MSMEs.
Time For Minimum Wages?
The Economic Survey 2018-19 proposed a minimum wage system for encouraging inclusive growth amid the government’s push for labour law reforms.
- The survey, tabled by Finance Minister Nirmala Sitharaman in Parliament on Thursday, proposed to set up a “national floor minimum wage” for all workers across five geographical regions.
- That’s in line with the suggestions to streamline various laws under four labour codes.
- The code on minimum wages subsumes the different definitions of wages that currently exist, and is at the most advanced stage among the four labour codes.
Here are the key proposals made by Economic Survey to support the labour code.
A Database For Citizen Welfare
The government can improve its delivery of public goods and services by creating a central welfare database of citizens by merging various existing databases, according to the Economic Survey 2018-19.
- The transformation of the world economy, thanks to the internet age, has led to data explosion and in recent years the marginal cost of data has been on a decline while its benefits to society are higher than ever, the survey.
- The fact that data is widely available and disseminated, its application across sectors creates societal benefits, the Economic Survey said, adding that it requires the government to view data as a public good and be treated as equally important as physical infrastructure.
If the information embedded in these datasets is utilised together, it can help reduce targeting errors in welfare schemes.
India’s Population: Changing Dynamics
India’s population growth is expected to see a sharp slowdown in the next two decades. Though the fertility rate is declining across the country, the rate of decline has been varied across states, the Economic Survey for 2018-19 said.
- Although the country as a whole will enjoy the “demographic dividend” phase, there is a wide variation in the experience of different Indian states, according to the survey.
- This, the survey said, indicates the need for phased changes in elementary education and health care for the ageing.
- Population in the zero to 19 age bracket has already peaked due to sharp declines in total fertility rates across the country.
Size of working-age population will start to decline in 11 out of the 22 major states by 2041.
IBC: What Got Recovered
The Insolvency and Bankruptcy Code has achieved resolutions in 94 cases, with financial creditors recovering nearly 43 percent, or around Rs 74,497 crore, in claims as of March 2019, according to the Economic Survey 2019.
- The recovery value of Rs 74,497 crore represents nearly double the liquidation value of these 94 cases, the survey showed.
- Around 378 companies ended up in liquidation, in which the total claims stood at Rs 2.57 lakh crore as of March 2019, the survey said.
Almost two-thirds of the cases took longer than the prescribed 270-day timeline.
The other important, and also new, area of focus in judicial capacity.
- The Survey states that delays in contract enforcement and dispute resolution are the biggest hurdle to ease of doing business as well as higher GDP growth.
- Most of the pendency, 87.5 percent the Survey notes, is in district and subordinate courts that are plagued by vacancies.
- “100 percent clearance rate can be achieved by filling out merely 2279 vacancies in the lower courts and 93 in High Courts,” the Economic Survey said.
The Survey notes that judicial infrastructure as well as appointment of judges needs special focus in the states of Uttar Pradesh, Bihar, Odisha and West Bengal.
‘Behavioural Economics — The Indian Way’
Economic surveys are about debates around the future of the economy, data, dot plots and bar graphs. The Economic Survey 2018-19, however, takes a detour into behavioural economics.
Not just of the garden variety but ‘Behavioural Economics — The Indian Way’.
- In a chapter titled ‘Policy For Homo Sapiens, Not Homo Economicus’, Chief Economic Adviser Krishnamurthy Subramanian invokes Indian mythology in the hope that behavioural change can fix age-old economic problems ranging from tax compliance to women’s empowerment.
- Insights from behavioural economics can be strategically utilised to create an aspirational agenda for social change, Subramanian writes.
The Survey recommends that a behavioural economics unit in the NITI Aayog be immediately activated.
In Other News Today...
- The NCLAT has introduced a new twist in the insolvency process as it stripped away a key power of the committee of creditors.
- Emerging market investor Mark Mobius has said that India has a lot of room for higher fiscal deficit and lower interest rates to boost the economy.
- The mid-cap index has been trading at a discount to the benchmark Nifty 50. BloombergQuint analyses why.
- Five structural reforms to fix the root causes of the financial sector's troubles, instead of the recent symptoms.
- Former RBI Governor Urjit Patel has broken his silence for the first time since resigning admitting the central bank was slow to take some timely measures.
- Walmart’s biggest acquisition in India may have also given it a digital payments goldmine.
- Indian markets remained optimistic ahead of the Union budget rising for a fourth straight session.
- And Prime Minister Narendra Modi has his first chance to spur an economy that’s lost the world’s fastest-growing tag.