New Delhi: Wealth creation and suitable policy to facilitate the same underlined the Economic Survey 2019-20 when finance minister, Nirmala Sitharaman tabled the detailed report card of the world’s 5th largest economy by nominal GDP for the past one year in Parliament on Friday.
Prepared by a team led by government’s chief economic advisor, Krishnamurthy Subramanian, the document concluded that India’s aspiration to become a $5 trillion economy would largely depend on strengthening both the invisible hand of markets and the hand of trust to support markets. This invisible hand needed strengthening through promotion of pro-business policies to provide equal opportunities for new entrants, enabling fair competition and ease of doing business, elimination of unnecessary policies that undermined markets through government intervention, facilitating trade for job creation, and efficiently scaling up the banking sector to be proportionate to the size of the Indian economy.
Introducing the idea of “trust as a public good that gets enhanced with greater use”, the survey advocated policies that empowered transparency and effective enforcement using data and technology.
The survey also enumerated a strategy for creation of 4 crore well-paid jobs by 2025 and 8 crore well-paid jobs by 2030 through integration of the government’s Make in India programme with assemble in India.
The industrial sector’s performance was the key to achieving the target of $5 trillion economy, the survey said. The sector’s performance in terms of its contribution in gross value added (GVA) improved in 2018-19 over 2017-18. However, as per the estimates of gross domestic product (GDP) by National Statistical Office (NSO), the real GVA of industrial sector grew by 1.6% in the first half of 2019-20 fiscal, as compared to 8.2% cent during the corresponding period last year. The low growth was primarily due to the -0.2% drop registered by the manufacturing sector in the first half.
The growth in agriculture and allied sectors was estimated at 2.9% for the current fiscal. It is expected to decline to 2.8% in 2020-21.
The survey took cognisance of data that showed the registration of new firms as having gone up significantly since 2014. While the number of new firms in the formal sector grew at a cumulative annual growth rate of 3.8% from 2006-14, the growth rate from 2014-18 stood at 12.2%. As a result, from about 70,000 new firms created in 2014, the number had jumped by about 80% to nearly 1.24 lakh new firms in 2018.
Based on advanced estimates, the survey estimated the GDP growth for 2019-20 to likely come in at 5%. This suggests an uptick in GDP growth in second half of 2019-20. Noting the impact of global headwinds on the Indian economy, Subramanian said, “All groups of countries have slowed down and in a globalised economy, India too has felt the effect.”
The GDP growth for the fiscal 2020-21 is estimated at 6-6.5%.
Thali’s affordability improves but inflationary pressures loom
In another interesting insight, the survey claimed that affordability of the thali or plate of food in relation to worker pay had improved gradually. The survey held that affordability of vegetarian thalis improved 29% from 2006-07 to 2019-20, while that for non-vegetarian thalis by 18%.
The conclusion has been drawn on the basis of Thalinomics: The Economics of a Plate of Food in India that attempts to quantify the amount an average person pays for a thali across India.
Inflation that had moderated since 2014 had, however, shown an uptick in recent months. Headline consumer price index (CPI) inflation has increased from 3.7% in 2018-19 in April-December period to 4.1% in 2019-20 for the corresponding period. Wholesale price index (WPI) inflation witnessed an increase between 2015-16 and 2018-19. It however declined from 4.7% in 2018-19 in the April- December 2018 to 1.5% during 2019-20 during the same period.
The government also sought to maximise social welfare after taking into account the resource constraints. “If wealth had not been eroded by wilful defaulters, we could have spent almost double the amount on social sectors,” Subramanian said referring to the adverse impact of large corporate defaults on the country’s finances.
The survey also observed that the country had substantially improved in the ease of doing business rankings in the last five years. India made a substantial leap forward in The World Bank’s Ease of Doing Business rankings from 142 in 2014 to 63 in 2019.
But the pace reforms in enabling ease of doing business needed to be enhanced further for India to be ranked within the top 50 economies on this metric. The country continued to trail in other parameters such as ease of starting business, registration of property, tax payments and enforcement of contracts.
After the release of the Economic Survey, prime minister Modi wrote on microblogging site Twitter, “The #EconomicSurvey 2019-20 focuses on wealth-creation for 130 crore Indians. It outlines a multi-faceted strategy to achieve a $5 trillion economy through enterprise, exports, ease of doing business and more. Do read! https://indiabudget.gov.in/economicsurvey/”, while also providing a link to the report.