In 2020-21, the GDP growth is predicted to increase to 6-6.5%, a significant increase from the 5% experienced during 2019-20. The Survey emphasizes that this projected growth in India’s GDP is not an overestimation.
Government Expenditure and Formal Employment
A standout recommendation in the Survey is for the rationalization of non-committed revenue expenditures such as subsidies. This is because a substantial proportion of revenue expenditure such as interest payments, wages and salaries, and pensions are committed. However, the Survey warns against reducing capital expenditure. Interestingly, there has been a significant rise in formal employment, which increased from 17.9% in 2011-12 to 22.8% in 2017-18, suggesting formalization in the economy.
Remarkable Increase in New Firms Creation
In 2018, there was an 80% boost in the creation of new firms compared to 2014. According to data on Entrepreneurship from World Bank, India now holds third place in terms of the number of new firms created.
Observations on Inflation
There was a substantial decline in inflation from 3.2% in April 2019 to 2.6% in December 2019. This change implies a weakening of demand pressure in the economy. This underpins the observation that when demand surpasses supply, it leads to higher prices i.e., Demand pull inflation.
| Year | Inflation Rate |
|---|---|
| April 2019 | 3.2% |
| December 2019 | 2.6% |
India’s Balance of Payments (BoP)
The BoP position improved to USD 433.7 billion in September 2019 due to a narrowing Current Account Deficit (CAD), which is 1.5% of GDP in the first half of 2019-20.
Increase in Foreign Direct Investment and Remittances
Net FDI inflows remained buoyant, attracting USD 24.4 billion in the first eight months of 2019-20. This figure was much higher than the corresponding period of 2018-19. Furthermore, net overseas remittances in the first half of 2019-20 accounted for over 50% of total receivables in 2018-19, standing at USD 38.4 billion. According to a 2019 World Bank report, India’s 17.5 million diaspora made it the top remittance-recipient country in 2018.
Merchandise Trade and Performance of Key Sectors
India’s merchandise trade balance improved from 2009-14 to 2014-19, largely due to a more than 50% decline in crude prices in 2016-17. The top five trading partners of India continue to be the USA, China, UAE, Saudi Arabia, and Hong Kong.
As per the Index of Industrial Production (IIP), the industrial sector registered a growth of 0.6% in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November). The services sector accounted for about 55% of the economy and Gross Value Added (GVA) growth, two-thirds of total FDI inflows into India, and about 38% of the total exports.
Agriculture Sector: A Key Component of the Economy
Despite the declining share of agriculture and allied sectors in the total GVA, it provides an essential secondary income source for millions of rural families through livestock income. However, agricultural productivity is constrained by a lower level of mechanization which stands at about 40% in India, much lower than China (59.5 %) and Brazil (75 %).
Suggestions for Improving Rank in Ease of Doing Business
To enhance the current rank (63 in 2019) in ease of doing business, continuous coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping, and different port authorities is recommended. Individual sectors such as tourism or manufacturing require a more targeted approach that strategically maps out the regulatory and process bottlenecks for each segment.
