Eco Survey highlights India’s growth trajectory: India Inc.

On Friday, January 29, finance minister Nirmala Sitharaman tabled the Economic Survey Report 2021 in the Parliament. The survey, authored by a team of economists led by chief economic advisor, Krishnamurthy Venkata Subramanian, talks about the health of various sectors of India's economy and highlights the reforms that the Indian government ought to undertake in order to propel growth.

The survey pointed out that India is expected to witness a strong recovery in the fiscal year 2021-22. For the full fiscal, the survey projected a contraction of 7.7%, followed by a V-shaped recovery in the next fiscal. For the fiscal year 2021-22, gross domestic product (GDP) will expand by 11%. For the April-June quarter of the present fiscal, GDP contracted by a record 23.9%. For the next quarter, the contraction came down to 7.5%.

Here's how India Inc. and various analysts, from different sectors, reacted to the Economic Survey and its findings.

The Economic Survey 2020-21 has focussed on an assessment of how the Covid-19 pandemic is being managed, the trade-offs between the differing compulsions of community health protection and economic recovery, with the protection of lives being the paramount consideration; how to manage the dialectical tensions between ramping up growth and reducing inequality; the need for sensible regulations, as well as the centrality of innovation for fostering growth.

The Survey also points to the need for ramping up public spending in healthcare as well as in community surveillance and protection; and the need to revive and fortify investments in infrastructure creation as delineated in the National Infrastructure Pipeline. This focus on accelerating infrastructure creation is expected to yield three-fold benefits: improving people’s ease of living, priming the economy, and absorbing large numbers of the young into non-farm employment.

The Economic Survey aims to chart a way out of the pandemic crisis, towards a future of robust growth, as also suggested by the IMF’s World Economic Outlook of January 2021.

Several key points made in the survey are in tune with the current requirements of the economy and we hope to see a reflection of these in the upcoming Union Budget. To bring the improving growth trajectory on a firm footing and extend it to many more sectors, continuous support from the government is needed through the year 2021.

We need a Keynesian type of demand stimulation and the budget must inject a heavy dose of fiscal stimulus to prop up both consumption and investment. FICCI has been strongly advocating the need to prioritize growth over fiscal considerations and the Economic Survey reiterates the point on having a counter-cyclical fiscal policy. This is not the time to be hemmed in by potential impact of an expansionary fiscal policy on sovereign ratings but walk the extra mile to meet the national requirements.

As the government expands its balance sheet, there will be a need to augment revenues. There are several avenues that can be looked at including strategic sale and privatization of public sector enterprises. Indications are that the Government is actively looking at this route and we would see some major announcements in the budget. Given the state of the stock market, it is the right time to make good use of the valuations and garner additional resource.

The Economic Survey has also reiterated the need for greater role to be played by the private sector and for the government to lessen the burden of regulations on industry. Different arms of the government led by DPIIT are already working in this area and FICCI has had several rounds of consultations with the government on how to reduce the regulatory and compliance burden on industry across sectors. Our objective should be to make regulatory frameworks in India a source of competitiveness rather than an inhibiting factor the Indian industry.

The Economic Survey has projected a strong V shaped recovery with an 11% growth in FY22. It is an achievable target given the lower base owing to the consensus that 7% plus contraction will be experienced in FY21. The Economic Survey has laid out 10 ideas towards achieving and sustaining a higher growth rate basing it on the theme of wealth creation.

Trust and market forces doing a handshake has been the basis of the 10 ideas. Jobs is what India needs to put us on the virtuous cycle of enhanced consumption, resource generation for the government to invest in infrastructure, and investments by the private sector and wealth creators should continue to sustain job creation.

The Survey, authored by Dr Krishnamurthy Subramanian, presents an optimistic outlook for the next financial year projecting 11 per cent real GDP growth. That sounds rather conservative and if we continue to do well on containing and finally eliminating the Covid-19 virus, the growth for 2021-22 can even surprise for better.

The Survey is absolutely wise on laying emphasis on almost trebling the public expenditure on healthcare services from 1 per cent to 2.5-3 per cent of the GDP. The Economic Survey is certainly a pointer towards significant rise in Budget allocations for the sector.

The Economic Survey focuses on core themes that have now become ever-more vital for India to overcome the consequences of the COVID-19 pandemic and to restore its growth trajectory; towards becoming one of the top-performing major economies in the world. The first focus area is the improvement of individual health outcomes and the provision of community protection to all, deploying best available tools and technology, with collateral expectations of a substantial enhancement in public healthcare spending.

Another area of focus is the augmentation of India’s infrastructure stock and the implementation of the National Infrastructure Pipeline with a projected investment of INR111 trillion. The need to augment the country’s rural and agricultural processing and marketing infrastructure has also been thrown into relief in the survey. There is also a timely focus on ensuring sustainability, and mitigating climate change impacts, while undertaking India’s journey towards accelerated economic growth.

The Economic Survey challenges the status quo and calls for bold policy measures to achieve long term sustainable growth. By questioning the established norms like sovereign rating methodology, and corroborating the growth with overall upliftment of the large population, both in rural and urban India, it sets the tone for this year’s Budget to go aggressive on reforms, simplification of tax and regulatory laws and ease of doing business.

Boosting domestic manufacturing capabilities has been the top priority for the government, especially in the wake of the COVI-19 pandemic and anti-China sentiment coupled with the border tensions. The government has indicated that the response for the PLI scheme for bulk-drug parks and medical devices is ‘very positive’. As part of the Atmanirbhar Bharat scheme, it is remarkable that the PLI Scheme is encompassing ten key sectors. Time is ripe to establish India as a key manufacturing hub spanning across the sectors, and we have necessary resources, skilled and cheap labour and investor friendly regulatory framework to make India a key part of the global supply chain.