The Economic Survey, usually presented a day before the annual Union Budget, has been tabled at noon in Parliament on July 4. The Survey serves as the official economic report of the country.
Here are the highlights:
Cuts in repo rate not flowing down
Chief Economic Adviser Krishnamurthy Subramanian speaks at the press conference:
“Today there are significant opportunities in technology available for banks to screen borrowers so that the level of credit goes up but so does the quality of the borrowing.”
“Monetary policy transmission is one key tool to reduce the cost of capital. Despite cuts in repo rate, it is not flowing down.”
Govt standing by GDP numbers
Chief Economic Adviser Krishnamurthy Subramanian speaks at the press conference:
“Investment cannot go up unless the cost of capital goes down. The cost of capital internationally is quite low.”
“There has been a lot that has been written about the veracity of the GDP numbers. Rather than getting into details, my observation is that India is an economy with several touch points for policy. Because of these many touch points, it is very difficult to create a narrative that is different from the truth.”
“We will be sticking to the fiscal deficit glide path laid out.”
“Investment as a % of GDP has to be in excess of 30-35%. In China, at its peak, it was close to 50%. Gross fixed capital formation currently in India is at 29.3%. This should be increased to the mid-30% level.”
“It is important that we stay on the fiscal consolidation path.”
'Jobs are being created'
Chief Economic Adviser Krishnamurthy Subramanian speaks at the press conference:
“In order for job creation to happen, it's the young firms that grow and exploit the economies of scale that create a lot of jobs. What we need to focus on is unshackling the MSMEs and enable them to grow and thereby create jobs and exports in the economy.”
“When tellers were replaced by ATMs, it may seem that jobs were lost, but if you look at the entire value chain instead of a silo, it becomes clear that jobs are actually being created.”
From vicious cycle to virtuous cycle
Chief Economic Adviser Krishnamurthy Subramanian speaks at the press conference:
“The intent is that the economy has to be taken to a virtuous cycle from a vicious cycle. A favourable demographic trend supports this virtuous cycle. Investment is the key driver of this virtuous cycle.”
“This idea of viewing an economy as a virtuous cycle or a vicious cycle... have arrived at this by really examining evidence from China and other Asian economies, that have registered high growth.”
“We have tried to learn from a couple of important changes that have happened: Swacch Bharat and Beti Bachao Beti Padhao.”
“As citizens we owe it to ourselves to think about our duties and not just our rights.”
“What is critical is that investment enhances productivity and enables firms to compete in international markets. Other developing economies have been export-driven during their high-growth phases and this is highly critical.”
Chief Economic Adviser Krishnamurthy Subramanian speaks at the press conference:
"To achieve vision of $5 trillion economy, a strategic blueprint is needed. This Survey seeks to lay out that blueprint," he says.
He adds that this year’s Economic Survey was guided by ‘blue sky thinking’. "The Survey adopts an unfettered approach in thinking about the appropriate economic model for India. This is reflected in the sky blue cover of the Survey," he says.
"We have been growing at a good rate, but need to shift gears to grow at a sustained 8% rate to reach $5 trillion economy," he adds.
"India a bright spot in global economy"
The CEA talks about additions to the Survey, inspired by Gandhiji's talisman of 'think of the weakest person and see how policies can be used to make their lives better'.
"India has been bright spot in global economy, growing faster than all major economies," he says, adding, "Not only have we registered high growth rates, but with low inflation and fiscal deficit that has followed the glide path down."
He also highlighted the Goods and Services Taxes (GST) and the Insolvency and Bankruptcy Code (IBC) as important structural reforms that have taken place in last five years.
GNPA ratio in public sector banks down by 1.4 percentage points
The Survey says: “The performance of the banking sector (domestic operations), Public Sector Banks (PSBs) in particular, improved in 2018- 19. The Gross Non-Performing Advances (GNPA) ratio of SCBs decreased from 11.5% to 10.1% between March 2018 and December 2018.”
However, NBFC have performed badly, says the Survey. “The GNPA ratio of NBFC sector deteriorated to 6.5% as in December 2018 from 6.1% in March 2018. The net NPA also increased marginally to 3.6% in December 2018 from 3.2% in March 2018.”
National TFR to be lower than replacement rate by 2021
The Survey predicts that the national Total Fertility Rate (TFR) will be lower than the replacement rate in 2021.
The TFR for India as a whole is 2.3, currently. Rural areas have a TFR of 2.5, while urban areas are lower, at 1.8.
India’s TFR rate.
The working age population is expected grow by roughly 9.7million per year during 2021-31, and 4.2 million per year during 2031-41.
The Survey expects a significant decline in elementary school-going children in the next two decades.
Survey suggests merging different datasets held by govt
The Survey, claiming that data is a public good, suggests merging distinct datasets held by the government.
The different datasets held by the government.
It does say that this would have to be within the legal framework of data privacy. “Currently, much of the data is dispersed across different registries maintained by different ministries. This is why every time a citizen has to access a new service, they are asked to collect all the documents to prove their identity and prove their claim on the process,” says the Survey.
Priority Sector Lending suggested for MSMEs
Firms with less than 100 workers account for more than 50% of all organised firms in manufacturing but contribute just 14% to employment and 14% to productivity. Larger firms account are only 15% by number, but account for 75% employment and close to 90% of productivity.
The Survey suggests that MSMEs receive a 10-year sunset clause, that labour laws be deregulated and the sector be given priority in lending.
This year’s Survey also focuses on sectors such as tourism, and other services.
Changes suggested in govt’s flagship scheme names
The Survey suggests that the government’s flagship schemes for social welfare and taxation be changed to more accurately reflect the Centre's agenda. The document suggests a behavioural economics approach to naming these schemes.
The changes, as suggested, are:
- From ‘Beti Bachao Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi)
- From ‘Swachh Bharat’ to ‘Sundar Bharat’
- From ‘Give It Up” for LPG subsidy to ‘Think about the Subsidy’
- From ‘tax evasion’ to ‘tax compliance’
Steps for sustained growth
Data as a public good, emphasising legal reforms, ensuring policy consistency, encouraging behavior change using behavioral economics, nourishing MSMEs, reducing cost of capital, reducing risk-return trade-off for investments, are some of the focuses of the Survey.
The Survey “departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium”.
The Survey also states that 8% GDP growth is required for India to achieve the Prime Minister’s vision of a $5 trillion economy.
Finance Minister Nirmala Sitharaman tables the Economic Survey in the Lok Sabha.
Finance Minister Nirmala Sitharaman has tabled the Economic Survey in the Rajya Sabha. It will be tabled in the Lok Sabha at noon.
The Economic Survey for 2017-18 painted the picture of an economy that gave reason for both optimism and caution. It projected that GDP growth could accelerate to 7-7.5% in 2018-19 , from 6.75% in the current fiscal, reinstating India as the world’s fastest-growing major economy.
It would be interesting to see what the latest figures say, as former CEA Arvind Subramanian presented a paper in Harvard University postulating that the GDP growth between 2011-17 was significantly lower than the 7% shown by the official figures. The Prime Minister’s Economic Advisory Council (PMEAC) released a detailed note enumerating its objections to the paper.
