Economic Survey 2019-20

Even as the country grapples with a five-year slump in economy, the government has projected a 7 per cent growth in the current financial year as opposed to the 6.8 per cent recorded in the last financial year. The pre-Budget Economic Survey 2019-20, authored by the new chief economic advisor Krishnamurthy V Subramanian and presented by Finance Minister Nirmala Sitharaman in the Parliament a day ahead of the Union Budget, calls for a huge boost in spending and reforms to accelerate higher rate of expansion to double the economy’s size to USD 5 trillion by 2024-25 – target set by Modi 2.0.

The real gross domestic product growth, which slowed to a five year low of 5.8 per cent in the first three months of 2019 - well below China’s 6.4 per cent, is expected to rise to 7 per cent in the fiscal year 2019-20 that started in April, it said.

GDP growth was 6.8 per cent in 2018-19, down from 7.2 per cent in 2017-18. India is currently the sixth largest economy in the world with a size of USD 2.7 trillion. It is expected to overtake Britain to become the fifth largest next year.

Subramanian said investment (especially private), is the “key driver” that boosts demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction and generates jobs.

At a media briefing, he said structural reforms such as ones in the labour sector are needed to bring in the muchneeded private investment.

Also, micro, small and medium enterprises sector needs focus as the bulk of the job creation and growth support would come from this segment.

While the survey has retained the fiscal deficit estimate for 2018-19 at 3.4 per cent, the general fiscal deficit --Centre and states combined -- has been pegged at 5.8 per cent in 2018-19, down from 6.4 per cent in the previous fiscal.

But for India to become a USD 5 trillion economy (more than double the current size) by 2024-25, it needs to sustain a real GDP growth rate of 8 per cent, which international experience suggests is possible only through a sustained “virtuous cycle” of savings, investment and exports, said the survey.

“The political stability in the country should push the animal spirits of the economy, while the higher capacity utilisation and an uptick in business expectations should increase investment activity in 2019-20,” the survey said.

It said oil prices will decline in current fiscal, pushing consumption. Consumption accounts for about 60 per cent of the GDP.

“ The extent of recovery in the farm sector and farm prices will decide the push to rural consumption, which is also dependent on the situation of monsoon,” it said adding some regions are expected to receive less than normal rains, which could prove to be detrimental for crop production.

The survey suggested policies to unshackle MSMEs to grow, create jobs and enhance productivity. It also called for reorienting policies to promote young firms which have the potential to become big, rather than MSME firms which remain small.

The survey flagged the need to prepare for the ageing of the population, necessitating more healthcare investment and raising the retirement age in a phased manner.

Stating that low pay and wage inequality remain serious obstacles towards achieving inclusive growth, it called for legal reforms, policy consistency, efficient labour markets and use of technology focus areas.

Contract enforcement, it said, remains the biggest constraint to improving Ease of Doing Business ranking. 

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