When Finance Minister Nirmala Sitharaman presented the annual Economic Survey in Parliament on January 29, the policymakers, scientists and those who track the Indian economy looked closely for the first thing: growth forecasts for 2021-22. The survey is identified as the official economic report card of the nation includes forecasts for growth and much more.
The Economic Survey, what is it?
Usually, the annual Economic Survey is presented one day before the annual budget is presented. It serves as the economy’s official survey. However, this year it was presented by the Finance Minister Nirmala Sitharaman on January 29, 2021, Friday, three days before unveiling the Union Budget for 2021-22 on February 1, 2021.
What does the survey contain?
The Economic Survey offers a comprehensive account of the state of the economy, the outlook and the threats facing politics. It carries sectoral overviews and commentary on the necessary reform steps. The perspective of the survey acts as a marker for potential policy moves.
Who drafts the economic survey?
The Chief Economic Advisor (CEA) of India is given the responsibility for this job. On the same lines, this year’s economic report card of the nation is written by the Krishnamurthy Subramanian and his team.
What is the primary use of the report?
The report sets out predictions of economic development, offering comprehensive explanations why it predicts that the economy will accelerate or decelerate faster. It also often calls strongly for such particular reform steps in accordance with its analysis and predictions.
Are guidelines like this binding?
The government is not bound to implement these guidelines and acts merely as a guide for strategy. In the past, the Economic Survey has favoured policy changes that disagree with the government’s official line of thought of control. These do not generally function as measures of what to anticipate in the annual budget. Political adjustments recommended in the Economic Survey have not been expressed in policy plans on several occasions.
What are the most important points in the current year’s survey?
- Growth of GDP
The Survey’s estimates of gross domestic product (GDP) growth for 2021-22 and projections for the current year (2020-21) would be among the most monitored pieces of data as it will give indicators of how rapidly the government expects the economy to accelerate to a faster path.
According to the report released on Friday, India’s Gross Domestic Product is projected to record a growth of 11% in the financial year 2021-22. The nominal GDP is expected to expand by 15.4% after the 7.7% pandemic-driven contraction in 2020-21.
The first advance forecasts published earlier this month by the Central Statistics Office (CSO) estimated that India would decelerate to (-) 7.7 per cent in 2020-21.
This was triggered by a medical emergency, unlike other recessions caused by economic failures, such as the debt bubble of 2008. Until hitting a stable growth state, can India move through many peaks and troughs covering many quarters?
India’s actual gross domestic product (GDP) growth is expected by the International Monetary Fund (IMF) to plunge to 11.5 per cent in 2021, followed by 6.8 per cent growth in 2022.
This will be a great instance of a V-shaped recovery in a textbook. This is the best-case situation for which one wishes. This occurs because, aided by a government boost that drives up demand, the economy explodes up as fast as it had sunk. Wage and production growth, consumption increases and higher household spending stimulates firms to add capacity lines and recruit more.
Are there signs of a bottoming out of the Indian economy? Are there green shoots of growth that can be found in the economy as a whole? When is it possible that the Indian economy will again hit a sweet spot? Is India going to reclaim its missed status as this year’s fastest rising global economy in the world? Answers to these concerns can be included in the Economic Survey.
2. Covidonomics
A catastrophic trail of devastation through the economic landscape has been left by Covid-19 and its spread, blowing the very system of conventional monetary policy preparation into smithereens.
Every component of fiscal policy preparation in the world, and in India, almost every component of the annual accounting exercise, and every component of expectation and forecast, now deserves a second glance. In an unpredictable atmosphere, decision managers will now be called upon to make a new collection of populations. Revenue and tax enforcement have been diminished by economic shocks. The lockdowns and extended sanctions have caused many companies to close down or reduce activities, limiting tax revenues from the government.
The cost of healthcare would see a sharp increase and the government will be compelled to deliver a number of stimulus initiatives to help corporations and people remain solvent.
World leaders, including Prime Minister Narendra Modi, did not hesitate to equate the problems of the coronavirus with those of war. Strong artillery bombing does not exist, but the economic mutilation may turn out to be much deeper and larger.
What are the lessons for economic strategy and decision making? A comprehensive chapter on COVID-19 and the changes it has brought about in monetary policy in Orthodox thought can be anticipated.
Per year, the budget includes a chapter on new concepts from textbooks that need to be introduced to conventional policy practice.
It was around Thalinomics last year and being pro-company versus pro-crony. The year before, nudge theory and behavioural economics were discussed. Might this year be about Covidonomics?
3. Economics of the Farm
When finance minister Nirmala Sitharaman first unveiled a series of agricultural reform initiatives in May 2020, many saw them as a demonstration by the Narendra Modi government of its intention to speak about marshalling reforms that aimed to tip the terms in favour of farmers.
Structurally, these moves were based on policy amendments. These required a revision of laws that supplied oxygen to vested interests in many ways, unscrupulous intermediaries to local political strongmen, that kept previous regulations alive.
The three laws legislated by the government of Modi-The Farmers’ Produce Exchange and Commerce (Promotion and Facilitation) Act, 2020; the Price Guarantee and Farm Services Act, 2020 Agreement on Farmers (Empowerment and Protection); and the Necessary Commodities (Amendment) Act, 2020 aim to promote barrier-free trade in agricultural products outside the markets notified under the various state Agriculture Produce Market Committees (APMC) legislation.
They further establish a contract-farming system and place stock restrictions on agricultural produce only if market prices are rising sharply.
Most political parties have pressed for such amendments over the past few years, which illustrates how their present opposition to farm laws is motivated largely by political convenience and opportunism, rather than merit.
The Economic Survey could reinforce the need for these reforms, which have met with intense farmers’ protests.
