The Indian Finance Minister recently presented the Economic Survey ahead of the government’s budget for the fiscal year commencing on April 1, 2021. The survey outlines the current state of the Indian economy with an overarching theme of “Saving Lives and Livelihoods”. This annual documentation serves as an authoritative source of data on India’s economy, providing insights into the previous year’s economic performance, anticipated challenges, and proposed solutions.
The History and Relevance of the Economic Survey
Introduced in 1950-51, the Economic Survey of India is a report presented by the Economics Division of the Department of Economic Affairs (DEA), under the guidance of the Chief Economic Advisor. The first Economic Survey was presented alongside the Union Budget. However, from 1964 onwards, it was separated from the Budget. The primary purpose of this document is to provide a comprehensive overview of the country’s economy, making it a vital tool in policy framing.
India’s Strategy against Covid-19 Pandemic’s Economic Impact
The onset of Covid-19 forced the government to adopt a four-pillar strategy comprising containment, fiscal measures, financial initiatives, and long-term structural reforms. The pandemic affected both demand and supply, nonetheless, India announced structural reforms to mitigate the damage and maintain its position in the global supply chain. The Rs. 1.46-lakh crore Production Linked Incentive (PLI) scheme anticipates creating substantial employment opportunities while bolstering India’s role in global partnerships.
The Path Towards Economic Recovery
Post lockdown, the Indian economy has been showing signs of a resilient V-shaped recovery starting July 2020. This recovery pattern indicates a fast and sustained revival after a sharp economic decline. The recovery is due to a resurgence in high-frequency indicators like power demand, rail freight, E-Way bills, GST collection, steel consumption, etc. The economy is expected to further benefit from the vaccination drive, promising a robust recovery in the service sector and effective growth in consumption and investment.
The Estimation of GDP’s Growth
As per the projections, India’s real GDP would grow by 11% in 2021-22, and nominal GDP would increase by 15.4%, marking the highest increase since India’s independence. The GDP for Financial Year (FY) 2020-21 is estimated to contract by 7.7%.
Foreign Investment Inflows
India experienced an increased inflow of Foreign Direct Investment (FDI), with net inflows reaching USD 27.5 billion during April-October 2020, indicating a 14.8% increase compared to the first seven months of FY 2019-20.
Debt Sustainability and Growth
As per the survey, growth leads to debt sustainability. The ‘Interest Rate Growth Rate Differential’ (IRGD) is critical in determining debt sustainability. In the Indian context, because of its high growth rates, debt sustainability doesn’t pose much concern, even under worst-case scenarios.
The Performance of Various Sectors
The services sector, contributing over 54% of India’s Gross Value Added (GVA), was affected, yet showed signs of a V-shaped recovery. Agriculture and Allied activities marked a growth of 3.4%, while the Livestock contribution in total agriculture and allied sector GVA increased from 24.32% (2014-15) to 28.63% (2018-19). The Indian start-up ecosystem also significantly progressed amidst the pandemic.
Healthcare, Education and Skill Development
The survey emphasized the need to increase government spending on healthcare from the current 1% to 2.5-3% of GDP as outlined in the National Health Policy 2017. The literacy level in India reached nearly 96% at the elementary school level; however, discrepancies persist among social-religious groups. The Unified Skill Regulator- National Council for Vocational Education and Training (NCVET) was operationalized recently to enhance vocational training and skill development.
Towards Sustainable Development and Equality
India has made significant strides in mainstreaming the Sustainable Development Goals (SDGs) into its policies and programs. However, the country still struggles with low levels of female Labour Force Participation Rate (LFPR) due to unequal division of unpaid domestic work and caregiving services between genders. To ensure economic growth benefits everyone equally, the survey emphasized the importance of focusing on economic growth to facilitate poverty reduction and ensure wealth redistribution.
Overall, the Economic Survey 2021 represents a comprehensive review of the state of India’s economy in the face of the Covid-19 pandemic. It provides critical insights into various sectors, helping to frame suitable policies and strategies for the future economic progress of the nation.
