India is in the cusp of a V-shaped recovery
It believes that once growth picks up in a sustainable manner, fiscal consolidation can be pursued. But, for now, fiscal policy will have to remain at the centre-stage to support growth.
“Unlike the theme of private investments and wealth creation in earlier surveys, the present economic survey focuses on saving lives and livelihoods and a counter-cyclical fiscal policy,” Dr Sunil Kumar Sinha of In-Ra pointed out.
He said this is but obvious, given the on-going COVID-19 pandemic and its impact on the economy.
The survey talks about the strategy adopted by India to overcome challenges and the measures taken to support the people especially at the bottom of the pyramid.
As a result of the policy put in place, the economic survey articulates that India is gradually coming out of the 23.9 per cent contraction in GDP in the first quarter and expected to witness a V-shaped recovery.
It talks about the ‘supply’ shock due to the lockdown, but says that the measures undertaken by the government and the Reserve Bank of India (RBI) not only have been adequate, but also have prepared the economy to sail through when the pent-up demand returns.
“It also highlights the reforms that were undertaken during this period, and expected to strengthen the potential of primary and secondary sectors of the economy to create jobs. Most of these reforms are aimed at enhancing the efficiency and the potential of the economy,” Ind-Ra said.
The Economic Survey emphasises the importance of the healthcare sector and states that a healthcare crisis can get transformed into an economic and social crisis like the COVID-19 pandemic.
Therefore, Ind-Ra says, taking firm steps towards Universal Healthcare Coverage, along with improving the healthcare accessibility and affordability in the country is a must.
It also draws attention towards the importance of technology-enabled platforms as an alternate distribution channel for remote delivery of healthcare services.
The economic survey says that states that implemented Pradhan Mantri Jan Arogya Yojana have shown a significant improvement in several health outcomes compared to the states that did not.
Dwelling on the issue of growth verses debt suitability, it says that the government can be more relaxed about debt and fiscal spending during a growth slowdown or an economic crisis as is the case currently.
During economic crises, a well-designed expansionary fiscal policy stance can contribute to better economic outcomes in two ways.
First, it can boost potential growth with multi-year public investment packages that raise productivity. Secondly, the multi-year nature of public investments would contribute to credibly lifting growth expectations.
Apart from discussing various themes in volume 1, the economic survey in Volume 2 focuses on the state of the economy.
The survey is hopeful of the economy recovering in 2021-2022 to 10 per cent-12 per cent real GDP growth, after contracting by 7.7 per cent in 2020-2021.
The real GDP growth in 2020-2021 will be the lowest and in 2021-22 will be the highest, in the post-independence history of India.
The 10 per cent-12 per cent real GDP growth appears achievable, along with 4 per cent GDP deflator growth. “In all likelihood, the Union Budget 2021-2022 would use a nominal GDP of Rs224.822 trillion, which will be similar to the Rs224.894 trillion GDP used in the preparation of the 2020-21 budget.
The survey also projects 6.5 per cent and 7 per cent real GDP growth for 2022-2023 and 2023-2024, respectively, and states that with 10 per cent and 12 per cent real growth in 2021-2022, the Indian economy will be at 90 per cent and 91.5 per cent, respectively, of the trend level by 2023-2024.
“At the time of global financial crisis, the economy came back to the trend level of GDP after a gap of two years,” Ind-Ra notes in its report.