Economic Survey States India needs to sustain a real GDP growth rate of 8%

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New Delhi : The Economic Survey tabled by Union Finance and Corporate Affairs Minister Nirmala Sitharaman in Parliament on July 4, 2019, projects bright prospects for economic growth. The Survey says its theme is about enabling a “shifting of gears”, “to achieve the objective of becoming USD 5 trillion economy by 2024-25, as laid down by the Prime Minister”. It says for this “India needs to sustain a real GDP growth rate of 8%”.

The Survey says that it “makes the case for investment, especially private investment as key driver, that drives demand, creates capacity, increases labour productivity, introduces new technology and generate jobs”.  The Survey suggests that “Exports must form an integral part of the growth model because higher savings preclude domestic consumption as the driver of final demand.”

The Survey suggests that to tackle various economic challenges of demand, jobs, exports these elements are to be all complimentary and not as separate problems. The Survey states that these macro-economic elements exhibit significant complementarities, and may become a part for catalysing the “economy into a virtuous cycle”.  The Survey presents “data as a public good, emphasises legal reform, calls for policy consistency and for encouraging behavior change using principles of behavioral economics.”

The Economic Survey states the key ingredients should “include focus on policies that nourish MSMEs to create more jobs and become more productive, reduce the cost of capital and rationalize the risk-return trade-off for investments.” It states that India’s economy has performed well during the last 5 years and the Government ensured that the benefits of growth and macroeconomic stability reached the bottom of the pyramid of society.

The Economic Survey states that while world output grew at 3.6% in 2014 and in 2018, India took giant strides forward to become the sixth largest economy by sustaining growth rates higher than China.  The Survey stated that the “average inflation in these 5 years was less than the inflation level of the preceding 5 years matching the lowest levels attained in the country’s post-independence history.   The current account deficit (CAD) remained within manageable levels and foreign exchange reserves rose to all-time highs.”

The Survey states that such scenario emerged from a new institutional framework of constituting of the ‘Monetary Policy Committee(MPC)’ in February 2015 with the mandate to target a headline inflation of 4 per cent with a band of two percentage points on either side.  It said that “discipline was also imposed on the Gross Fiscal Deficit (GFD). The Fiscal Responsibility and  Budget Management (FRBM) Act of 2003 which determines the glide path for the ratio of  Gross Fiscal Deficit to GDP target of 3% got a new lease of life since 2016 and this ratio declined from 4.5% in 2013-14 to 3.4% in 2018-19.

The Survey states that the “Aadhaar Act, 2016 has enabled creation of pathways for the benefits of growth to reach the bottom of socio-economy ladder.”  It states that the Pradhan Mantri Jan Dhan Yojana (PMJDY) and Jan Dhan, Aadhar, Mobile (JAM) trinity further secured Direct Benefit Transfers (DBT)  of over Rs 7.3 lakh crore under various schemes like Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), National Social Assistance Programme (NSAP), Pradhan Mantri Awas Yojna-Gramin (PMAY-G), Pradhan Mantri Ujjwala Yojana(PMUY) etc,.  Presently 55 central ministries through 370 cash-based schemes are transferring benefits under the DBT mechanism. 

The Survey states that creation of physical infrastructure accelerated significantly during 2014-19.  “Electricity finally reached everybody in India in April 2018.  The construction of national highways (NH) proceeded at a rapid pace with more than 20% of the existing highway length of 1,32,000 km being constructed in the last four years alone.  Scheme to extend  flight connectivity to Tier 3 and Tier 4 towns was launched in 2017.

Fiscal federalism strengthened significantly when the 14^th Finance Commission increased the share of States in the divisible pool of central taxes from 32% to 42%.  The launch of GST in July 2017 and the GST Council experiences provides key learning for implementing cooperative federalism in several other areas such as labour and land regulation. The Insolvency and Bankruptcy Code (IBC) was operationalised in 2017 and significant number of non-performing assets were brought under its ambit.              

“India aims to grow into USD 5 Trillion economy by 2024-25 to become the third largest economy in the world.  This requires real annual growth rate in GDP of 8%.”