Economic Survey 2020 Live: India FY21 GDP Growth Pegged At 6-6.5%

Making an attempt to quantify what a common person pays for a 'thali' across India, the Economic Survey on Friday said affordability of vegetarian 'thalis' improved by 29 percent while that of non-vegetarian by 18 percent during the 2006-07 and 2019-20 period.

Dedicating a full chapter on "Thalinomics -- The Economics of a Plate of Food in India", the survey analysed data from the Consumer Price Index for industrial workers for around 80 centres in 25 states/Union Territories from April 2006 to October 2019 to arrive at the cost of a 'thali'.

As per the survey, a vegetarian thali comprises a serving of cereals, 'sabzi and dal' and the non-vegetarian thali comprises of cereals, sabzi and a non-vegetarian component.

"Both across India and the four regions – north, south, east and west – it is found that the absolute prices of a vegetarian thali have decreased significantly since 2015-16 though the price has increased in 2019," it said.

As a result, the survey said, "An average household of five individuals that eats two vegetarian thalis a day gained around Rs 10,887 on average per year while a non-vegetarian household gained Rs 11,787, on average, per year."

“Many reform measures were introduced since 2014-15 to enhance the productivity of the agriculture sector as well as efficiency and effectiveness of agricultural markets for better and more transparent price discovery," the survey said.

(Source: PTI)

India's development trajectory is critically linked with investments in social infrastructure and the country's march towards attaining Sustainable Development Goals is firmly anchored in investing in human capital and inclusive growth, the Economic Survey 2019-20 said.

To reap the benefits of demographic dividend, the government is committed to improve the outcomes in education and skilling, and to provide employment and affordable healthcare to all, as per the survey tabled in Parliament on Friday.

"India's march towards achieving Sustainable Development Goals (SDGs) is firmly anchored in investing in human capital and inclusive growth," Economic Survey 2019-20 said.

Scaling up development programmes for improving connectivity, providing housing and bridging gender gaps in socio-economic indicators is of paramount importance for sustainable development.

It stated that the public investments in social infrastructure like education, health, housing and connectivity have a critical role in ensuring inclusive development in a developing country like India.

The 2030 Agenda for sustainable development calls for global partnership to ensure peace and prosperity for people and the planet, now and into the future.

(Source: PTI)

The government’s Economic Survey for 2019-20 claims a big boost to bottom-of-the-pyramid entrepreneurship in recent years. It says, referencing World Bank data on entrepreneurship, that India ranks third in the number of new firms created.

The survey also claims that new firm creation has risen dramatically since 2014—at a compounded annual growth rate of 12.2 percent between 2014 and 2018 versus 3.8 percent from 2006-2014.

“As a result, from about 70,000 new firms created in 2014, the number has grown by about 80 percent to about 1,24,000 new firms in 2018,” the survey states.

While flagging a host of inefficiencies at PSBs, the survey stayed away from making any dramatic suggestions for change.

It neither recommends privatisation nor a sharp reduction in the government’s holding in these lenders. It does suggest that India needs banks of greater scale, which has been pursued by the government through mergers announced last year.

The Economic Survey 2019-20 instead focuses on the use of fintech and employee stock ownership at PSU banks.

The Economic Survey's warned against signs of “impending liquidity problems” health score of the housing finance companies and non banking finance companies, suggesting liquidity allocation among firms of different ‘health scores’, to arrest their “financial fragility”in an efficient manner.

The analysis of the Health Score has the following findings:

• The HFC sector exhibited a declining trend post 2014 and overall health of the sector worsened considerably by the end of FY2019.
• The Score of the Retail-NBFC sector was consistently below par for the period 2014 -19.
• Larger Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower score for the entire period of 2014-19.

• Inflation witnessing moderation since 2014.
• Measures to safeguard farmers like procurement under Price Stabilisation Fund, Minimum Support Price need to be made more effective.
• Observed divergence between retail and wholesale prices in commodities in four metropolitan cities.
• Divergence particularly high for vegetables like onion and tomato.
• This may be due to the presence of intermediaries and high transaction costs.

• India’s balance of payments position improved from $412.9 billion of forex reserves in end-March, 2019 to $433.7 billion in end-September 2019.
• The current account deficit narrowed from 2.1% in 2018-19 to 1.5% of GDP in first half of 2019-20.
• Foreign reserves stood at $461.2 billion as on January 10, 2020.

India needs to aggressively improve its position in the Ease of Doing Business rankings, the survey said, pointing out that the country still trails in parameters such as ease of starting a business, registering property, paying taxes and enforcing contracts.

The country has seen a jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings under Prime Minister Narendra Modi’s government.

Case Studies:

• For merchandise exports, the logistics process flow for imports is more efficient than that for exports.
• Electronics exports and imports through Bengaluru airport illustrate how Indian logistical processes can be world class.
• The turnaround time of ships in India has almost halved to 2.48 days in 2018-19 from 4.67 days in 2010-11.

Suggestions for further Ease of Doing Business:

• Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.
• Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.

The Economic Survey, released by the Chief Economic Adviser’s office a day ahead of the Union Budget, has proposed a new structure of disinvestment to maximise returns from public sector enterprises.

The survey suggests that the government take a leaf out of Singapore’s Temasek model and transfer its holdings in central public sector enterprises to a separate corporate entity, which would be managed by an independent board. This entity can then continue to divest individual units at appropriate points in time.

The strategic disinvestment of Government’s shareholding of 53.29 per cent in BPCL led to an increase of around Rs. 33,000 crore in national wealth, it pointed out. Similarly, aggressive divestment of CPSEs will bring in higher profitability, better efficiency, increased competitiveness and professionalism to the companies, it said.

India’s aspiration to become a $5 trillion economy depends critically on strengthening the invisible hand of the market while supporting it with the hand of trust, the survey said.

• Provide equal opportunities for new entrants.
• Enable fair competition and ease of doing business.
• Eliminate policies unnecessarily undermining markets through government intervention.
• Enable trade for job creation.
• Efficiently scale up the banking sector.

Speaking about the on and off debate about the credibility of India’s GDP estimation following the revised estimation methodology in 2011, the survey said concerns of an overstated GDP are “unfounded”.

Here are the key highlights of the survey’s argument:

• GDP growth is a critical variable for decision-making by investors and policymakers. Therefore, the recent debate about accuracy of India’s GDP estimation following the revised estimation methodology in 2011 is extremely significant.
• As countries differ in several observed and unobserved ways, cross-country comparisons have to be undertaken by separating the effect of other confounding factors and isolating effect of methodology revision alone on GDP growth estimates.
• Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.
• Several advanced economies such as UK, Germany and Singapore have their GDPs misestimated with incompletely specified econometric model.
• Correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.

The survey attributes India's slowdown to weak global growth and a "sharp decline in real fixed investment", induced by a "sluggish growth of real consumption".

On the supply side, agricultural growth is also showing signs of improvement, it added. “Rise in CPI-core and WPI inflation in December 2019 suggests building of demand pressure.”

India’s Economic Performance In 2019-20:

• India’s external sector gained further stability in first half of 2019-20.
• Current Account Deficit narrowed to 1.5 percent of GDP in the first half of 2019-20 from 2.1 percent in 2018-19.
• Sharper contraction of imports as compared to that of exports in the first half of 2019-20, with the easing of crude prices.
• Headline inflation expected to decline by year-end
• Rise in CPI-core and WPI in December 2019-20 suggests the building of demand pressure.
• In sync with an estimated 2.9 percent growth in global output in 2019, global trade is estimated to grow at 1.0 percent after having peaked in 2017 at 5.7 percent
• However, it is projected to recover to 2.9 percent in 2020 with a recovery in global economic activity.
• India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to a more than 50 percent decline in crude prices in 2016-17.
• India’s top five trading partners continue to be the USA, China, UAE, Saudi Arabia, and Hong Kong.

The Survey's 5 percent estimate for India's GDP growth in the current fiscal indicates that it expects growth to pick up in the second half, according to the statement.

"The uptick in second half of 2019-20 would be mainly due to ten positive factors like picking up of NIFTY for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandize exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection," the survey said.

As for the growth in FY21, the survey asks the government to "use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21."

The coming year will pose several challenges on the fiscal front, said the economic survey, highlighting shortfall in revenue and new expenditure commitments.

The Economic Survey has addressed a number of topics this year, ranking from the widely debated issue of overestimation of the gross domestic product to climate change.

Here’s a sneek peak:

• Wealth Creation: The Invisible Hand Supported by the Hand of Trust
• Entrepreneurship and Wealth Creation at the Grassroots
• Pro-business versus Pro-markets
• Undermining Markets: When Government Intervention Hurts More Than It Helps
• Creating Jobs and Growth by Specializing in Network Products
• Targeting Ease of Doing Business in India
• Golden jubilee of bank nationalisation: Taking stock
• Financial Fragility in the NBFC Sector
• Privatization and Wealth Creation
• Is India’s GDP Growth Overstated? No!
• Thalinomics: The Economics of a Plate of Food in India
• India’s Economic Performance in 2019-20
• Fiscal Developments
• External Sector
• Monetary Management and Financial Intermediation
• Prices and Inflation
• Sustainable Development and Climate Change
• Agriculture and Food Management
• Industry and Infrastructure
• Social Infrastructure, Employment and Human Development

The Economic Survey has recognized that India’s fiscal deficit target may have to be relaxed this year to support economic growth, Bloomberg reported. This comes as the government faces its largest revenue shortfall in a decade.

The government's current fiscal target stands at 3.3 percent of the gross domestic product. It has already deferred its elusive 3 percent fiscal deficit target to March 2021. Originally, it had planned to bring the gap down to 3 percent by March 2017.

India’s gross domestic product growth is at its slowest since 2008-09 with a 4.8 percent growth in the quarter ended September. The government’s advance growth estimate stands at 5 percent for the financial year 2019-20.

The Economic Survey 2020 has pegged India’s GDP Growth to be in the range of 6-6.5 percent in FY19, PTI reported. Bloomberg News had reported the same number earlier today.

Finance Minister Nirmala Sitharaman has tabled the Economic Survey 2020 in the parliament, on the first day of the year’s Budget Session.

The Economic Survey 2020 pegs India's GDP growth for financial year 2020-21 at 6-6.5 percent, Bloomberg reported. It estimates the 2019-20 growth at 5 percent. The rebound in growth will partly be because of a low base, the survey says according to Bloomberg.

Other Highlights

• India said to see lower interest rates on merger of state banks.
• India finance minister said to favor food subsidy cut to narrow fiscal deficit.

Finance Minister Nirmala Sitharaman is set to table the Economic Survey of India 2020 -- authored by Chief Economic Advisor Krishnamurthy Subramanian -- in the parliament at 12 p.m., ahead of the Union Budget tomorrow.

In his second such survey, Subramanian along with his team will address a press conference at 1:45 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. His predecessor Arvind Subramanian had 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.

In the 2019 survey, Krishnamurthy Subramanian proposed a minimum wage system for encouraging inclusive growth amid the government’s push for labour law reforms, and spoke of the need for a ‘virtuous cycle’ - the kind sparked by increasing private investment.

India’s economy has deteriorated further since the 2019 Economic Survey, with GDP growth at the slowest pace since 2008-09. Consumption, investment, and credit have taken a hit, along with an expectation of an imminent widening of the fiscal gap in the budget tomorrow.