Economic Survey 2018-2019 Analysis

By moderator July 6, 2019 17:23

Economic Survey 2018-2019 analysis is the first of new Government and first under new FM NirmalaSitharaman. It outlines a vision to achieve a $5 trillion economy by 2024-25 with a sustained growth rate of 8% on the back of investments and with major emphasis on exports.

The survey describes private investment as a key driver of growth, jobs, exports, and demand. It says India needs to almost double its annual spend on infrastructure to $200 billion and the real challenge lies in harnessing private investment.

With India set to witness a sharp slowdown in population growth in next two decades, investments in health care as well as plan for increasing retirement age in a phased manner are needed to prepare for an aging population.

Behavioral Economics
From conventional economics to the integration of behavioral economics into policymaking, has resulted in higher productivity and economic growth. Schemes like Swachh Bharat, BetiBachaoBetiPadao and Ayushman Bharat represent the changing nature of policymaking.

Jobs and MSMEs
All size based incentives to MSMEs must have a sunset clause of fewer than 10 years with necessary grandfathering. Deregulating labor law restrictions can create significantly more jobs.

Data to be treated as a public good within the legal framework and used for benefit of society with appropriate privacy and protection. Data should be “of the people, by the people, and for the people”.

Given the potential economic and social multipliers of a well functioning legal system, backlogs of vacancies in the lower judiciary are to be cleared within five years. It is also one of the biggest constraints to ease of doing business in India.

Swachh (Clean), Swasth (Healthy) and Sundar (Beautiful) Bharat
Traceable health benefits brought about by Swachh Bharat Mission (SBM) Financial savings from a household toilet exceed the financial costs to the household by 1.7 times on average and 2.4 times for poorest households. Environmental and water management issues need to be incorporated in SBM for sustainable improvements in the long-term

Enabling Inclusive growth through affordable, reliable and sustainable energy
Increasing per capita energy consumption by nearly 2.5 times to enter the middle-income group. India has set ambitious targets of renewable energy and has made significant progress with India now standing globally 4th in wind power, 5th in solar power and 5th in total renewable power installed capacity. Energy efficiency programs have been a success with savings worth more than Rs 50000 crores. Increase in market share of electric vehicles, however, is dismal and access to fast charging capabilities must be fostered to augment it.

Rural Distress
Use of technology in streamlining MGNREGS has helped increase its efficiency. Skillful use of technology, when combined with an unwavering commitment to monitoring effectiveness of government schemes, can make a substantial difference on the ground.

Redesigning a Minimum Wage System in India for Inclusive Growth
Survey proposes a well-designed minimum wage system as a potent tool for protecting workers and alleviating poverty. Effective minimum wage policy as an inclusive mechanism for more resilient and sustainable economic development.

State of the Indian Economy 2018-2019

India still the fastest growing economy in the world.
Growth of GDP moderated to 6.8 percent in 2018-19 from 7.2 percent in 2017-18.
Inflation contained at 3.4 percent in 2018-2019.
Growth in fixed investment picked up from 8.3 percent in 2016-17 to 9.3 percent next year and further to 10.0 percent in 2018-19.
Current account deficit is manageable at 2.1 percent of GDP.
Fiscal deficit of the Central Government declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19and debt to GDP ratio of 44.5 percent.

General Government (Centre plus states) on the path of fiscal consolidation and fiscal discipline. The revised fiscal glide path envisages achieving a fiscal deficit of 3 percent of GDP by FY 2020-21 and Central Government debt to 40 percent of GDP by 2024-25.

Banking system improved as NPA ratios declined and credit growth accelerated. Benchmark policy rate first hiked by 50 bps and later reduced by 75 bps last year. Financial flows remained constrained because of the decline in the equity finance raised from capital markets and stress in the NBFC sector.

Headline inflation based on CPI-Combined continuing on its declining trend for the fifth straight financial year remained below 4.0 percent in the last two years. Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend for the fifth financial year has remained below 2.0 percent for the last two consecutive years.

India’s SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs: Kerala and Himachal Pradesh are the front runners with a score of 69 amongst states. Chandigarh and Puducherry are the front runners with a score of 68 and 65 respectively among the UTs.

In Indian rupee terms, the growth rate of exports increased owing to the depreciation of the rupee while that of imports declined in 2018-19. Net capital inflows moderated in April-December of 2018-19 despite robust foreign direct investment (FDI) inflows, outweighed by withdrawals under portfolio investment. India’s External Debt was US$ 521.1 billion at end-December 2018, 1.6 percent lower than its level at end-March 2018, but not unsustainable. The total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 percent in 2015 to about 38 percent at the end of 2018.

Composition of India’s exports and import basket in 2018-19(P):

Exports (including re-exports): INR 2307663 Cr.Imports: INR 3594373 Cr.
Top export items continue to be Petroleum products, precious stones, drug formulations, gold, and other precious metals. Top import items continue to be Crude petroleum, pearl, precious, semi-precious stones, and gold. India’s main trading partners continue to be the US, China, Hong Kong, the UAE, and Saudi Arabia.

Gross Value Added (GVA) in agriculture improved from a negative 0.2 per cent in 2014-15 to 6.3 per cent in 2016-17 but decelerated to 2.9 per cent in 2018-19.Gross Capital Formation (GCF) in agriculture as percentage of GVA marginally declined to 15.2 per cent in 2017-18 as compared to 15.6 per cent in 2016-17.
Diversification of livelihoods is critical for inclusive and sustainable development in agriculture and allied sectors. Policies should focus on dairying as India is the largest producer of milk, Livestock rearing particularly of small ruminants and Fisheries sector, as India is the second largest.

Overall Index of Eight Core Industries registered a growth rate of 4.3 percent in 2018-19. India’s ranking improved by 23 to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.

Services sector (excluding construction) has a share of 54.3 percent in India’s GVA and contributed more than half of GVA growth in 2018-19. The services sector growth declined marginally to 7.5 percent in 2018-19 from 8.1 percent in 2017-18.

Accelerated sub-sectors: Financial services, real estate, and professional services.Decelerated sub-sectors: Hotels, transport, communication and broadcasting services. Services share in employment is 34 percent in 2017.

Government expenditure (Centre plus States) as a percentage of GDP – Health: increased to 1.5 percent in 2018-19 from 1.2 percent in 2014-15. Education: increased from 2.8 percent to 3 percent during this period.
Substantial progress in both quantitative and qualitative indicators of education is reflected in the improvements in Gross Enrolment Ratios, Gender Parity Indices and learning outcomes at primary school levels.
Around 1, 90, 000 km of rural roads constructed under Pradhan Mantri Gram SadakYojana (PMGSY) since 2014.
About 1.54 crore houses completed under Pradhan MantriAwasYojana (PMAY) as against a target of 1 crorepucca houses with basic amenities by 31st March 2019.
Accessible, affordable and quality healthcare is provided through the National Health Mission and Ayushman Bharat scheme for a healthy India.

Also read: Economic Survey: Aadhaar Aided MGNREGS Beneficiaries

Economic Survey 2018-19 Calls For Improvement In Contract Enforcement Regime

By moderator July 6, 2019 17:23