Economic Survey: India 2019-20 GDP Growth Projected At 7%
Catch all live updates on the Economic Survey 2018-19 by KV Subramanian here.
KEY HIGHLIGHTS
Watch Live | Economic Survey 2018-2019 Press Conference
Exports Need To Be Integral To India's Growth, Survey Says
Exports must form an integral part of India’s growth model because higher savings preclude domestic consumption as the driver of final demand, the survey said.
- With the micro-economic and macroeconomic foundations laid over the last five years, the Indian economy is ready to shift gears so that economic growth, jobs and exports can be pushed up to the next level.
- While it is true that world trade is currently facing some disruptions, India’s share in global exports is so low that it should focus on market share.
- One could even argue that the current disruptions provide an opportunity for India to insert itself into global supply chains.
Survey Suggests Path For India's Agricultural Policies
Diversification of livelihoods is critical for inclusive and sustainable development in agriculture and allied sectors, the survey said.
Agriculture policies should focus on dairying as India is the largest producer of milk; livestock rearing particularly of small ruminants and the fisheries sector, as India is the second largest producer there, the document said.
It added that the thrust should be on micro-irrigation to improve water use efficiency.
- 89 percent of groundwater extracted is used for irrigation. Hence, focus should shift from land productivity to ‘irrigation water productivity’. Thrust should be on micro-irrigation to improve water use efficiency.
- Fertiliser response ratio has been declining over time. Organic and natural farming techniques including Zero Budget Natural Farming can improve both water use efficiency & soil fertility.
Need Sustainable Energy Policy For Inclusive Growth: Survey
Access to fast battery charging facilities needed to increase the market share of electric vehicles, the survey said, adding that better energy policies are required for inclusive growth.
- 2.5 fold increase in per capita energy consumption needed for India to increase real per capita GDP by $5,000 at 2010 prices, and enter upper-middle income group.
- 4-fold increase in per capita energy consumption needed for India to achieve 0.8 Human Development Index score.
- Market share of electric cars only 0.06 percent in India while it is 2 percent in China and 39 percent in Norway.
Redesigning Minimum Wage System For Inclusive Growth
KV Subramanian has proposed minimum wages to all employees and workers.
- Survey supports rationalisation of minimum wages as proposed under the Code on Wages Bill.
- ‘National Floor Minimum Wage’ should be notified by the central government, varying across five geographical regions.
- Minimum wages by states should be fixed at levels not lower than the ‘floor wage’.
- Minimum wages can be notified based either on the skills or on geographical region or on both grounds.
India Needs Health, Retirement Policies For The Ageing Masses: Survey
Despite being one of the youngest countries in the world in terms of average age of the population, India's policy makers need to prepare for those who are ageing, the survey said.
- The country needs to invest in healthcare and increase the retirement age in a phase manner, it added.
- Sharp slowdown in population growth expected in next 2 decades. Most of India to enjoy demographic dividend while some states will transition to ageing societies by 2030s.
- National Total Fertility Rate expected to be below replacement rate by 2021.
- Working age population to grow by roughly 9.7mn per year during 2021-31 and 4.2mn per year during 2031-41.
- Significant decline to be witnessed in elementary school-going children (5-14 age group) over next two decades.
- States need to consolidate/merge schools to make them viable rather than build new ones.
CEA Suggests Merging Government Datasets
The government should merge the numerous datasets it holds, to multiply benefits, the survey said.
- Society’s optimal consumption of data is higher than ever given technological advances in gathering and storage of data.
- As data of societal interest is generated by the people, data can be created as a public good within the legal framework of data privacy.
- Government must intervene in creating data as a public good, especially of the poor and in social sectors.
Ramp Up Capacity In The Lower Judiciary, CEA Says
Productivity improvements of 25 percent in lower courts, 4 percent in high courts and 18 percent in Supreme Court can clear backlog, the CEA said in this year’s survey.
- Around 87.5 percent of pending cases are in the district and subordinate courts.
- 100 percent clearance rate can be achieved by filling out merely 2,279 vacancies in the lower courts and 93 in high courts.
- States of Uttar Pradesh, Bihar, Odisha and West Bengal need special attention.
Need To Reduce Policy Uncertainty To Foster Investment, CEA Says
The survey proposed a reduction in policy uncertainty by the way of keeping the policy consistency with the forward guidance and assuring quality of processes in government department.
- Significant reduction in Economic Policy Uncertainty in India over the last one decade, even when economic policy uncertainty increased in major countries, especially the U.S.
- Uncertainty dampens investment growth in India for about five quarters.
- Lower economic policy uncertainty can foster a salutary investment climate.
Must Look At MSMEs As Source Of Growth, Job Creation: CEA
India needs a clear vision and a plan to grow into a $5 trillion economy, said CEA KV Subramanian in a thread of tweets today, highlighting the need for reform and a robust push for investment.
He further said that Indian MSMEs need to be “freed from shackles that convert them into dwarfs” and that MSMEs need to be seen as a source of innovation, growth and job creation.
General Government Fiscal Deficit At 5.8% In FY19
The Economic Survey pegs the general government fiscal deficit, which includes the deficit of the central government and state governments, at 5.8 percent, according to a Doordarshan tweet, retweeted by the Finance Ministry’s handle.
The central government managed to meet its revised fiscal deficit projection of 3.4 percent of GDP in FY19, according to data from the Controller General of Accounts. All eyes are on the fiscal deficit projection for FY20. While the interim budget had pegged FY20 deficit at 3.4 percent, fears abound on whether a revenue shortfall will allow for that deficit projection to be maintained.
A Look At This Year's Economic Survey: Key Themes
From a glimpse at the cover of this year’s survey, the key themes explored seem to be jobs, savings, investment, exports, ‘nudge’ and India’s goal of growing into a $5 trillion economy.
Investment Key Driver To Create Virtuous Cycle
The Economic Survey highlighted the importance of reviving investment in the economy, saying that it creates a "virtuous cycle". “The higher capacity utilisation and uptick in business expectations should increase investment activity,” Krishnamurthy Subramanian writes in the survey, according to Bloomberg.
Investment in the economy has been weak due to deleveraging of corporate balance sheets. In the economic survey for last year, former CEA Arvind Subramanian had also highlighted the urgent need to revive investment.
"The ratio of gross fixed capital formation to GDP climbed from 26.5 percent in 2003, reached a peak of 35.6 percent in 2007, and then slid back to 26.4 percent in 2017," Arvind Subramanian had written.
MPC Framework Successful In Containing Inflation
The Economic Survey, tabled on Thursday, said that India’s Monetary Policy Committee framework has been successful in containing inflation.
The new monetary policy framework was adopted in 2015 amid high retail inflation. Helped by factors such as low oil prices, inflation has since come down sharply. For two consecutive financial years, average inflation has remained close to the MPC’s target of 4 (+/- 2) percent.
India Sees Economy Rebounding This Year As Growth Risks Balance
India expects economic growth to rebound this year from a five-year low, aided by a pickup in demand and investment on the back of political stability in the country, according to people familiar with the matter told Bloomberg News, ahead of the presentation of the Economic Survey.
Real gross domestic product growth for the fiscal year started April 1 is projected at 7 percent, the people said, citing a finance ministry document, while asking not to be identified as the report isn’t public. According to the survey, India needs a growth rate of 8 percent to reach its goal of becoming a $5 trillion economy by 2025.
Political stability will help boost investments and lead to a rebound in growth, the document said. The upside and downside risks to growth are evenly balanced, with monsoon rainfall seen tipping the scales, the people said.
KV Subramanian's First Economic Survey
Krishnamurthy Subramanian, formerly an associate professor at Indian School of Business and a banking expert, was appointed as India's new CEA in December 2018 after Arvind Subramanian stepped down ahead of schedule in June 2018 citing personal reasons.
Over the last few months, he has suggested that the government needs to simplify land and labour laws.
Just yesterday, the new CEA tweeted that he is excited to table his first and the new government's first Economic Survey in Parliament.
Economic Survey 2019 Set To Be Tabled Today
India’s 2018-2019 economic survey - a document authored by the Chief Economic Advisor to the government - has been tabled in the parliament today by Finance Minister Nirmala Sitharaman.
Newly appointed CEA Krishnamurthy Subramanian along with his team will address a press conference at 1:15 p.m. thereafter.
The annual document acts as a platform to pitch larger economic ideas and concepts which the government may or may not act upon. For example, former CEA Arvind Subramanaian restarted the debate on Universal Basic Income and its application in India. He also started the debate on the use of Reserve Bank of India’s excess reserves for narrowing the fiscal deficit.