Economic Survey 2022 updates | 'Revival of economic activity to pre-pandemic levels'

Chief Economic Advisor V . Anantha Nageswaran (centre) and others pose during a press conference, in New Delhi on January 31, 2022

Finance Minister Nirmala Sitharaman on January 31 presented the Economic Survey that details the state of the economy ahead of the Government's Budget for the fiscal year beginning April 1, 2022.

CEA Dr. V. Anantha Nageswaran will address a press conference today at 3:45 p.m. in New Delhi.

Ahead of the Union Budget 2022-23, Indian industry has urged the government to offer incentives for creating jobs, including special sops under the Production Linked Incentive (PLI) schemes already announced.

Here are the latest updates:

 

Economic Survey urges need for simplifying voluntary liquidation process

The Economic Survey 2021-22 has stressed on the need for a simplified procedure for voluntary liquidation of companies.“There is a case for simplifying the problems in the Voluntary Liquidation process, to improve ease of exit for business,” the Survey said.

“Apart from simplifying the issues in the various steps in the processes, there is a need for the creation of a single window for the entire process,” it added.

 

 

'Current thinking still evolving on Cryptocurrency'

On cryptocurrency, Mr. Sanyal says, "We have not covered the issue in the survey. This is something that is currently in discussion. We understand the various issue that are being highlighted by the Reserve Bank about the financial stability impacts of this. We can also see it in other countries like El Salvador."

 

Government job creation

On Government job creation, Mr. Sanyal says, "There are many sectors where the public sector is generating jobs, it may not be as government jobs. When you're talking about capital expenditure on infrastructure that is also a government job being created by government spending,"

 

'There was a significant decline in employment during the rigid lockdown and then a very significant revival'

"Economic survey does look into issue of unemployment. However there is dearth of good official unemployment data which is real time...what we do know from the official detailed surveys is that there was a significant decline in employment during the rigid lockdown and then a very significant revival upto about March. After that there was some impact from second wave, but data is not yet available, so we have to use proxies," Mr. Sanyal says, adding that EPFO data is being used as one of the proxies.

 

Exports and imports have recovered very strongly

Both exports and imports have recovered very strongly, Mr. Sanyal says, adding that the current account has moved into a small deficit but it is "very well within what we normally see.

On recovery of service sector and job losses, Mr. Sanyal says, "Due to the pandemic, and repeated lockdowns, it is natural that these contact intensive sectors will be affected. We have provided some liquidity support, but at the end of the day we will have to open these services. Therefore speed of vaccination remains a key factor."

 

Projection on a conservative side

Projection made by Economic Survey is on conservative side, CEA V . Anantha Nageswaran says. States and Centre both have increased capital expenditure, he adds.

 

Use of satellite and geospatial data

Principal Economic Adviser, Sanjeev Sanyal uses various examples to highlight the use of satellite and geospatial data to reflect the infrastructural growth in the country.

 

Patent application process

Patent applications and patents granted both have gone up in the last 10 years, Mr. Sanyal says, while taking into account that the country is far behind its global peers. "We have to the patents process a lot smoother," he says.

 

India's unique response: Barbell strategy, Safety Nets and Agile Framework

We used safety nets to provide buffers but also used high-frequency data to keep track of data and respond quickly, Mr. Sanyal says explaining India's unique response to the pandemic.  Spending on social services was ramped up, national programs like PM Awas Yojana kept going, he says.

"Post-covid world is not just a reinflation of the pre-covid world," Mr. Sanyal says, that the best way to create policy for future is to create flexibility for the economy while also ensuring presence safety nets.

 

Economic Outlook

Mr. Sanyal asserts GDP growth estimate at 8%-8.5%, backing this up by IMF data where India is the only country for which the forecast has increased.  Economy is in a good place to grow with macro-economic buffers, he says.

 

Macro-economic indicators

  • Fiscal Performance

Sharp increase in Tax and Non-tax collection of government, Mr. Sanyal highlights, calling it a genuine boost to the government.

  • Financial Sector

This sector has weathered the pandemic well, Mr. Sanyal says. Banks continue to become better capitalised, he adds.

Sanjeev Sanyal talks about the strong performance of the share market, calling it a "change in risk appetite"

  • External Sector

Capital flows have been doing very well, so the country has a "very healthy" balance of payments, with one of the highest Forex reserves.

  • Inflation

"CPI remains in the tolerance band, but WPI has popped back up and is in double digits," Mr. Sanyal says, calling it a matter of concern.

  • Vaccination Status

Sanjeev Sanyal says that the country has done extremely well in this sector

 

GDP 1.3% above pre-pandemic

"Total consumption is just shy of where we were before pandemic," Mr. Sanyal says discussing the GDP.

Exports have been major driver of growth, while imports were also strong.

 

Revival of economic activity to pre-pandemic levels

"There has been a revival of economic activity to pre-pandemic levels in 2021-22," Mr. Sanyal says.

Agriculture sector grew in 2020-21 and even in 2021-22, while the industrial sector went through a contraction but also eventually went though a significant revival, Mr. Sanyal highlights.

Services sector was most affected by lockdowns, contact intensive (tourism, travel, hotels etc) were affected more severely, he says.

 

Principal Economic Adviser presents the Economic Survey 2021-22

"It has been a particularly difficult year to do this," Sanjeev Sanyal, PEA, remarks as he presents the Economic Survey 2022.

Mr. Sanyal proceeds to give a history of the Economic Survey as a document. "The document kept growing," he says, highlighting the changes in the Survey brought out by key economic events such as in 1991 .

 

CEA V . Anantha Nageswaran speaks on the government taking a four-pronged approach to handle the pandemic and preparing the economy for a post-pandemic world.

 

‘Economic Survey 2022’ calls for standardised Cross-Border Insolvency framework

The Economic Survey 2021-22 has called for a standardised framework for Cross-Border insolvency as the Insolvency & Bankruptcy Code (IBC) at present does not have a standard instrument to restructure the firms involving cross border jurisdictions leading to several issues.

The proposal to frame a robust cross border insolvency framework has already been highlighted in the report of the Insolvency Law Committee (ILC) which hadrecommended the adoption of the United Nations Commission on International Trade Law (UNCITRAL) with certain modifications to make it suitable to the Indian context.

 

 

Udayam portal aid MSMEs in ease of doing business

The new registration process initiated by the Centre to promote and nurture Micro, Small and Medium Enterprises (MSMEs) has boosted the ease of doing business for the sector, and also reduced transaction time and costs, said the Economic Survey 2021-22, which was tabled on Monday.

As of January 17, 2022, the portal received over 66 lakh enterprises, of which 63 lakh were from micro enterprises, three lakh from small enterprises, and 34,355 from medium enterprises respectively.

 

 

Economic Survey projects 8%-8.5% growth in 2022-23

The Economic Survey for 2021-22, tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha, expects the GDP to grow by 9.2% this year and 8% to 8.5% in 2022-23, even as it expressed concerns about the implications of hardening inflation and energy prices.

“Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. The year ahead is also well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of the economy,” the Survey projected.

 

 

Sensex, Nifty surge 1.5% in mid-session

Equity benchmarks Sensex and Nifty jumped over 1.50 per cent in mid-session deals on Monday, after the Economic Survey 2021-22 projected a 9.2% growth rate for 2021-22. -PTI

Highlights

Highlights of the Economic Survey

  • GDP to grow by 9.2%

The Economic Survey for 2021-22 tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha expects India's GDP to grow by 9.2% this year, in line with recent official estimates, and 8% to 8.5% in 2022-23.

Stressing that India's overall macro-economic stability indicators show the economy is well placed to take on the challenges of 2022-23, the Survey argued that 'one of the reasons' for this is the government's unique response strategy that didn't 'pre-commit to a rigid response' but 'opted to use safety-nets for vulnerable sections' based on information.

"Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. The year ahead is also well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of the economy," the Survey projected.

  • 'Assumption that 'there will be no further debilitating pandemic related economic disruption''

The Survey's 8%-8.5% GDP growth estimate for the coming year is based on the assumption that 'there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl, and global supply chain disruptions will steadily ease over the course of the year'.

Inflation has reappeared as a global issue in both advanced and emerging economies.... India does need to be wary of imported inflation, especially from elevated global energy prices," the Survey has noted, even as it suggests that the double-digit wholesale price inflation in recent months will 'even out'.

The Survey acknowledges the risks that have emerged at the time it was being written, such as the new COVID-19 with the Omicron variant sweeping across the world, inflation jumping up in most countries, and the cycle of liquidity withdrawal being initiated by major central banks.

  • India transformed to 4th largest forex reserve

It highlighted that India's macro-economic stability indicators on the external front, fiscal front as well as financial sector health and inflation, are well-placed to take on the challenges of 2022-23.

Robust export growth and availability of fiscal space to ramp up capital spending to support growth next fiscal.

Govt. finances to witness consolidation in 2021-22, after an up tick in deficit and debt indicators during pandemic year FY21.

The survey says that India transformed from being among 'Fragile Five' nations to 4th largest forex reserve, giving policy room for manoeuvring.

  • 'India is poised for stronger investment'

India’s investment to GDP ratio has hit 29.6% in 2021-22, the highest level in seven years, the Survey said, attributing this capital formation to the Government’s policy thrust on quickening the ‘virtuous cycle of growth via capex and infrastructure spending’ has increased capital formation in the economy.

“While private investment recovery is still at a nascent stage, there are many signals which indicate that India is poised for stronger investment,” it added, citing record corporate profits in recent quarters and high mobilisation of risk capital by firms.

  • Improve productivity of small, marginal farmers

Taking on criticism that the 'Atmanirbhar Bharat approach' marks 'a return to old school protectionism', the Survey stated that "...the focus on economic resilience is a pragmatic recognition of the vagaries of international supply-chains'. 

While the 9.2% growth estimate for 2021-22 suggests the economy will rise above pre-pandemic level of 2019-20, the Survey conceded that private consumption and segments such as Travel, Trade and Hotels are yet to fully recover. “The stop-start nature of repeated pandemic waves makes it especially difficult for these sub-sectors to gather momentum,” it said.

Survey calls for improving productivity of small, marginal farmers through small holding farm technologies. Crop diversification towards oilseeds, pulses and horticulture needs to be given priority, the survey says.

Parliament

Finance Minister tables the Economic Survey 2022

FM Nirmala Sitharaman tabled the Economic Survey in Lok Sabha after the President's address.

The Economic Survey 2021-22, details the state of different sectors of the economy as well as reforms that should be undertaken to accelerate growth.

The gross domestic product (GDP) contracted by 7.3 per cent in 2020-21.

The Survey focuses on supply-side issues to improve the resilience of the Indian economy.

(With inputs from Agencies)

 


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