The Economic Survey 2020-21 tabled by the union finance minister Nirmala Sitharaman on Friday stated that India’s real GDP is expected to grow at 11% in the next fiscal.
The Economic survey predicted a “V-shaped” economic recovery for the country stating that the Covid-19 vaccination program will be one of the triggers for the growth. However, it cautioned that it will take at least the next two years for India to be able to reach back its pre-pandemic GDP levels.
Prepared by the economic adviser KV Subramanian and his team, the survey said that the government is going to miss its fiscal deficit target of 3.5% of GDP this year, as it has to focus more on reviving growth and economy.
Here are the top 10 highlights of the Economic Survey:
1. State of the Economy 2020-21: India’s GDP is estimated to contract by 7.7 per cent in FY 2020-21, while real GDP is projected to record a growth of 11.0 per cent in 2021-22. India’s four-pillar strategy calibrated fiscal and monetary support was provided attuned to the evolving economic situation, cushioning the vulnerable in the lockdown and boosting consumption and investment while unlocking. Long-pending structural reforms in agriculture, mining, labour, etc. were concurrently undertaken for the economy to return to the potential growth path, keeping super-hysteresis at bay. The estimated real GDP growth for FY 2022 at 11 per cent is the highest since independence.
2. Fiscal Developments: The year 2020-21 has been a difficult year from the fiscal perspective. The expenditure policy changed according to the needs of an evolving situation. It was initially aimed at supporting the vulnerable sections but once the lockdown was unwound, it was re-oriented to re-inflating overall demand through capital spending. The General Government (Centre plus States) is expected to register a fiscal slippage in FY 2020-21, on account of the shortfall in revenue and higher expenditure requirements.
3. External Sector: India is expected to witness the current account surplus during the current financial year after a gap of 17 years. While exports of gems and jewellery, engineering goods, textile and allied products slide, exports of drugs and pharma, software and agriculture and allied products improved. Pharma exports, in particular, hold the potential to be the pharmacy of the world.
4. Monetary Management and Financial Intermediation: Monetary policy remained accommodative in 2020. Gross Non Performing Assets ratio of Scheduled Commercial Banks decreased from 8.21 per cent at the end of March 2020 to 7.49 per cent at the end of September 2020. However, this has to be seen in conjunction with the asset classification relief provided to borrowers because of the pandemic.
5. Prices and Inflation: CPI inflation averaged 6.6 per cent in 2020-21 (Apr-Dec) and stood at 4.6 per cent in December 2020, mainly driven by rise in food inflation, which has increased from 6.7 per cent in 2019-20 to 9.1 per cent in 2020-21 (Apr-Dec), owing to build up in vegetable prices. Gold prices saw a sharp spike as investors turned to gold as a safe-haven investment amid COVID-19 induced economic uncertainties. Compared to other assets, gold had returns during the year that were considerably higher.
6. Sustainable Development and Climate Change: The pandemic has challenged the health infrastructure, adversely impacted livelihoods and exacerbated the inequality in the food and nutritional availability in the country. This has reemphasized the criticality of having institutions and mechanisms that can facilitate the country to absorb exogenous shocks well.
7. Agriculture & Food Management: India’s agricultural sector has shown its resilience amid the adversities of COVID induced lockdowns. 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 per cent at constant prices during 2020-21 (1st Advance Estimates).
8. Industry and Infrastructure: During FY20, total FDI equity inflows were US$49.98 billion as compared to US$44.37 billion during FY19. The similar number for FY21 (up to September-2020) was US$30.0 billion. The bulk of FDI equity flow is in the non-manufacturing sector leading to a reduction in the share of manufacturing in the FDI flows. Within the manufacturing sector, industries like automobile, telecommunication, metallurgical, non-conventional energy, chemical (other than fertilizers), food processing, and petroleum & natural gas get the bulk of FDI equity flows.
9. Services: India’s Services sector witnessed a significant set-back during the COVID-19 pandemic mandated lockdown. Owing to its contact-intensive nature, the sector contracted by nearly 16 per cent during the first half of the financial year 2020-21. Despite the disruptions being witnessed globally, FDI inflows into India’s services sector grew robustly by 34 per cent YoY during April-September 2020 to reach US$ 23.6 billion.
10. Social Infrastructure, Employment and Human Development: The combined (Centre and States) social sector expenditure as per cent of GDP has increased in 2020-21 compared to last year. Online schooling took off in a big way during the COVID-19 pandemic. The access to the data network, electronic devices such as a computer, laptop, smartphone etc. gained in importance due to online learning and remote working. Innovative measures were adopted to bring all strata of the society under the medium of online/digital schooling.
