Economic Survey 2019-20 Enable Markets, Promote ‘Pro-Business’ Policies and Strengthen ‘Trust’ in the Economy and Wealth Creation at Grassroots: Economic Survey 2019-20 has emphasised on entrepreneurship and Wealth Creation at the Grassroots. It has suggested that industrial sector performance is a key to achieve the target of a five trillion dollar economy. With the vision of ‘Sabka Saath, Sabka Vikas’, Prime Minister Shri Narendra Modi in his Independence Day 2019 speech highlighted that only when wealth is created will wealth be distributed. The Economic survey 2019-20, tabled by Union Minister for Finance And Corporate Affairs, Smt. Nirmala Sitharaman in the Parliament.
Theme of the Economic Survey 2019-20
“Enable Markets, Promote ‘Pro-Business’ Policies and Strengthen ‘Trust’ in the Economy, Ethical Wealth Creation Key to India Becoming a $ 5 Trillion Economy by 2025: Economic Survey 2019-20
The survey said for India to achieve a five trillion US dollar economy depends on promoting pro-business policies, strengthening the invisible hand of the market and ease of doing business. The Economic Survey gave a detailed analysis of the trends in India’s infrastructure sector which is necessary for growth. Power shortages, inadequate transport and poor connectivity affect overall growth performance. To achieve GDP of five trillion dollar by 2024 – 25, India needs to spend about 100 lakh crore rupees on infrastructure. According to the survey, there is a significant jump of around 2.62 crore new jobs with 1.21 crore in rural areas and 1.39 crore in urban areas. Over 69 lakh candidates have been trained under Pradhan Mantri Kaushal Vikas Yojana till November last year. The Economic Survey underscores various programmes and legislative measures that are in place to encourage female participation in the economy. Economic Survey 2019-20 has projected economic growth at 6 to 6.5 percent in the next fiscal. It has suggested that industrial sector performance is key to achieve the target of a five trillion dollar economy. The Economic Survey gave a detailed analysis of the trends in India’s infrastructure sector. The Survey emphasized that investment in infrastructure is necessary for growth. Power shortages, inadequate transport, and poor connectivity affect overall growth performance. To achieve GDP of five trillion dollars by 2024 – 25, India needs to spend about 100 lakh crore rupees on infrastructure.
According to the survey, there is a significant jump of around 2.62 crore new jobs with 1.21 crore in rural areas and 1.39 crore in urban areas. Over 69 lakh candidates have been trained under Pradhan Mantri Kaushal Vikas Yojana till November last year. The Economic Survey underscores various programmes and legislative measures that are in place to encourage female participation in the economy. The survey also stated that India’s large economy needs an efficient banking sector to support growth. The Survey expressed that if Indian banks were proportionately large in relation to the size of the Indian economy, India should have at least six banks in the global top 100 Banks. Presently the State Bank of India which is the largest public sector bank is at the 55th rank in the list.
India’s Rich Tradition of Wealth Creation
The Survey taps into ancient texts like Kautilys’s Arthashastra, Thiruvalluvar’s Thirukural and treatise on modern economics like Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations to emphasize upon the importance of ‘Ethical Wealth Creation’ as the root of economic activity and key to India becoming a $ 5 trillion economy by 2025.
Levers for furthering Wealth Creation : The Survey identifies several levers for furthering Wealth Creation, which are:
entrepreneurship at the grassroots as reflected in new firm creation in India’s districts;
promote ‘pro-business’ policies that unleash the power of competitive markets to generate wealth as against ‘pro-crony’ policies that may favour incumbent private interests;
eliminate policies that undermine markets through government intervention, even where it is not necessary;
integrate ‘Assemble in India’ into ‘Make in India’ to focus on labour intensive exports and thereby create jobs at a large scale;
efficiently scale up the banking sector to be proportionate to the size of the Indian economy and track the health of the shadow banking sector;
use privatization to foster efficiency. The Survey provides careful evidence that India’s GDP growth estimates can be trusted.
Economic Review 2019-20: Highlights
Union Finance and Corporate Affairs Minister Smt Nirmala Sitharaman presented the Economic Review , 2019-20 in Parliament today . The following are the highlights of the Economic Review 2019-20:
Wealth Generation: Invisible Support Supported by Trust
- India’s dominance as a global economic power during three-quarters of economic history is expressed by this.
- Kautilya’s ‘ Economics ‘ describes the role of prices in any economy (Spengler , 1971) .
- Historically , the Indian economy believed in the market’s invisible support with the help of trust:
- The market’s invisible support was reflected in the openness in economic transactions.
- The support of trust was underlined in moral and psychological dimensions.
· After the liberalization of the Indian economy by giving them the necessary support both pillars of the economic model advocated went in our traditional thinking.
· The economic review describes the broad benefits that are being gained from the market’s invisible support.
· India’s GDP per capita of liberalization is happening wealth creation as well as a significant increase in GDP.
· Increased liberal or sectors have been opened in the Economic Survey closed stated in sectors rate is higher.
· The Invisible cooperation need to resort to confidence , which is reflected by the performance of the financial sector during the period from 2011 to 2013.
The Economic Review mentions India’s aspiration to become a $ 5 trillion economy, which relies heavily on:
o Strengthening invisible market support
o support it with confidence
- Strengthen invisible cooperation by promoting business friendly policies
- Giving new entrants equal opportunity
- Ensuring proper competition and ease of doing business
- Ending policies that undermine markets unnecessarily through concerted government initiatives
- Ensuring trade for job creation
- Efficiently increase the business level of banking sector
- Adopting an idea of trust as a public commodity that grows with more use.
- The Economic Review suggests that policies should be in place that strengthen transparency and effective implementation through the use of data and technology.
Entrepreneurship and wealth creation at the grassroots level
- Entrepreneurship as a strategy for accelerating productivity and wealth creation.
- According to the World Bank , in terms of creating new companies India third.
- Since 2014, there has been a significant increase in the formation of new companies in India:
o During the period 2014 to 2018, the cumulative annual growth rate of new companies in the formal sector was 12.2 percent , while the growth rate during the period from 2006 to 2014 was 3.8 percent.
o About 1.24 lakh new companies were formed in the year 2018, which is almost 80 percent more than about 70 , 000 new companies formed in the year 2014 .
- The Economic Review looks at entrepreneurship-related components and carriers at the lowest level of the administrative pyramid in India, or in more than 500 districts.
- The number of new companies formed in the service sector is much higher than the number of new companies formed in manufacturing , infrastructure or agriculture.
- The survey underscores that at the grassroots level entrepreneurship is not driven only by necessity.
- A 10 percent increase in registration of new companies in a district leads to a 1.8 percent increase in gross domestic district product (GDDP).
- Entrepreneurship at the district level has a significant impact on wealth creation at the ground level.
- The formation of new companies in India is uneven and is spread across various districts and sectors.
- Literacy and education in any district gives a big boost to entrepreneurship at the local level:
o This effect is most visible when literacy is more than 70 percent.
o According to Census 2011 , the lowest number of new companies have been formed in Eastern India with the lowest literacy rate (59.6 percent).
- The quality of physical infrastructure in any district has a major impact on the formation of new companies.
- Ease of doing business and flexible labor laws make it easy to form new companies, especially in manufacturing.
- It has been suggested in the Economic Review that by increasing ease of doing business and implementing flexible labor laws, maximum employment can be created in districts and thus in states.
Business friendly vs market friendly
- The Economic Review states that India’s aspiration to become a $ 5 trillion economy depends on:
- Promote business friendly policy that releases the power of competitive markets for wealth creation.
- Moving away from a co-operative policy, which can promote the fulfillment of particularly private personal interests.
- From the stock market point of view , after liberalization, the steps that brought about a comprehensive change were quite rapid:
- Prior to liberalization, any company involved in the SENSEX was expected to remain in it for 60 years. This period reduced to only 12 years after liberalization.
- Every five years, a third of the companies involved in the SENSEX have seen a reshuffle , reflecting the steady inflow of new companies , products and technologies into the economy .
- Despite significant progress in ensuring competitive markets, the policies that promote synergies have adversely affected the value in the economy:
- During the period from 2007 to 2010, the performance of the equity indexes of the respective companies was 7 per cent higher than the market annually, reflecting the abnormal gains at the expense of ordinary citizens.
- In contrast, the performance of the equity index in 2011 was 7.5 percent lower than the market, reflecting inherent inefficiencies and price reductions in such companies.
2. Drug Price Control under ECA
- With DPCO 2013 controlling the prices of drugs, the prices of controlled drugs are much larger than those of unregulated similar drugs.
- The cost of cheap drug formulation has risen more than expensive drug formulation.
- This proved that the efforts made by DPCO for the availability of cheap medicines were reversed.
- The government, being a major purchaser of medicines, may pressurize the prices of cheaper drugs.
- The Ministry of Health and Family Welfare should use this right in a transparent manner on behalf of the government to deal with the purchase of medicines on its own.
3 . Government Intervention in Food Markets
· Food market due to government intervention , the government went even with the biggest buyer of wheat and rice as the biggest hoarders.
· Shrink the government to private business
· Increase the burden of food subsidies on government
· Dirdhavdi development of the agricultural sector increased inefficiencies of the market affected
· To make the policy more dynamic in food and cash transfer in place of traditional method for distribution of food grains – use of food coupons and smart cards.
4 . Debt waiver
· Center and states debt given the sorry Review
· Completely debt less beneficiaries waiver consumption , low savings , is less investment which would reduce their production partially debt than beneficiaries sorry.
· Debt affect the trend of the credit off-take advantage of the amnesty.
· They debt tend to have less formal credit flow to farmers who benefit from impunity and end the appropriateness of such debt forgiveness.
- Review suggestions
The government should systematically investigate the market areas with its unnecessary interference.
- It has been suggested that government interventions that were once true in various economies are now irrelevant to the changing economy.
- The elimination of such government interventions will result in market competition which will promote investment and economic growth.
Development and employment generation through specialization in network products
· The review noted that India has unprecedented opportunities similar to China in promoting labor-based exports.
· India’s stake assembled in India and make in India plan to the world in India in export markets by teaming together in 2025 to 3 .5 per cent in 2030 to 6 will percent.
· 2025 a good salary in the country by 4 ‘ll million jobs and in 2030 to the number 8 will be Rs.
· 2025 to India 5 became trillion economy export network products to promote the price for the Ane will be increased by a third.
· The review suggested that India should follow a strategy similar to China to take advantage of the following opportunities.
· To gain large scale expertise in labor based sectors especially network products.
To focus exclusively on large scale assembly activities of network products.
· Promoting the export markets of the rich countries.
· To facilitate export policy.
The Economic Review analyzes the impact of trade agreements made by India on the overall trade balance.
· Accordingly, the total number of products exported to India 10 0.9 Exports of the manufacturing products percent to 13 .4 increased percentage.
· Total imported products 8 0.6 per cent and imports of manufactured products 12 0.7 increase the percentage.
· Per year in India’s manufacturing trade surplus 0 .7 percent of the total products trade surplus 2 3 increased by percent.
Business Accessibility Goals in India
- While India ranked 142 in the World Bank’s Ease of Doing Business Rankings in 2014 , it rose to 63rd position in 2019 .
- However, the ease of starting a business in India still lags far behind the scale of property registration , payment of taxes and implementation of contracts.
- Several studies have been included in the review :
o Performance of logistics services in the export of goods was higher in the field of imports than in exports.
o Electronics Import and Export from Bangalore Airport spoke of how Indian logistics services have become world class.
o work of freight from ships in ports in 2010 -11 where 4 .67 was the day the 2018 -19 half staying in 2 48 Guy have received 1
Suggestions to improve business ease
o Suggestions to improve business ease include close cooperation between the Ministry of Commerce and Industry , the Central Board of Indirect Taxes and Customs , the Ministry of Shipping and other port authorities.
o The suggestion states that more targeted measures are needed to simplify the regulatory processes that create barriers in sectors such as tourism or manufacturing.
A Review of the Golden Jubilee of Nationalization of Banks
- The review stated that in 2019 , 50 years of nationalization of banks in India were completed.
- It was said that on the occasion of the golden jubilee of nationalization of banks, employees of public sector banks rejoiced that the survey suggested an objective assessment of public sector banks.
- It said that the banking sector could not grow at the pace with which the country’s economy had grown since 1969 .
o Only one bank in India is among the top 100 banks in the world. This situation places India in the category of countries whose economy size is many times less than India such as Finland which is India ( about 1 / 11th part ) and Denmark ( about 1 / 8th part ) .
- It is very important to have a strong banking sector in a large economy.
- Since public sector banks have a 70 percent share in the Indian banking system , they have a greater responsibility in supporting the economy.
o Public sector banks are not as capable as compared to their counterpart groups on the performance scale.
O 20l9 in public sector banks per average on a per input 23 a loss of money , while the non-public sector banks 9 6 gained money.
o For the past several years, credit growth in public sector banks has been much lower than non-public sector banks.
· Measures to enable more public sector banks
o Employees’ shareholding in the share of public sector banks.
o To increase the representation of the employees on the board of the bank and to give them financial incentives as per the shareholders of the bank.
o To make arrangements like GSTN to compile available data from public sector banks and use technology such as Artificial Intelligence and machine learning to better monitor the borrowers from the bank.
Financial Risk in NBFC Sector
· Given the current crisis of liquidity in the banking sector view in detection of promoting leading causes hazards sheds banking.
Key components of Recurring Risk
- Asset Liability Management (ALM) Risk
- Differential risk
- Financial and operational flexibility of a non-financial company
- Excessive dependence on large short-term funding
The review calculates the diagnostic (health score) for which the recurring risk of the housing finance company and retail non-banking retail companies is calculated.
Health score analysis
- The health score for the housing finance company sector shows a declining trend after 2014. By the end of 2019, the health score for the entire region was quite poor.
- Retail non-banking financial companies’ health score was significantly lower from 2014 to 2019.
- Large retail non-banking financial companies had higher health scores but medium and small companies had lower health scores from 2014 to 2019.
- The above findings suggest that health scores indicate early warning of posture cash problems.
Privatization and wealth creation
- The review examines the benefits arising from the disinvestment of CPSC and this leads to disinvestment of government enterprises.
- The disinvestment of the government’s 53.29 percent stake in HPCL increased the national wealth by Rs 33,000 crore.
- The performance of the strategic disinvestment of 11 central enterprises during 1999–2000 to 2003–04 has been analyzed.
- The net worth of Central Public Sector Undertakings has registered an increase in income from total profit assets, profit on equity etc.
- Central undertakings entrusted to private hands have succeeded in earning more assets from the same resources.
- Disinvestment of central undertakings has been suggested in the review.
- For more profit
- To boost efficiency
- To increase competition
- To promote commercialism
Is India’s GDP growth exaggerated? No.
- GDP growth is a complex upside to any investment as well as policy making by policymakers. Therefore, in the recent debate regarding the correct estimation of India’s GDP, it is very important to adopt the amendment in the assessment process in 2011.
- As countries have found in various unseen ways, the comparison of one country to another is done very carefully in which the effects of other confounding components are carefully separated and only the effect of process revision on GDP growth estimation has gone.
- The model in which GDP growth after 2001 has exceeded the 2.7 percent GST estimate has exceeded GDP growth estimates in 51 other countries out of 95 countries in sample time.
- Various developed economies, such as the UK, Germany and Singapore, underestimated their GDP, when the econometric paradigm was incorrectly specified.
- The model specified correctly, in which unseen variations among all countries, as well as international trends in GDP growth in different countries, could not detect any faulty assessment of growth in India or other countries.
- Worries of defectively estimated Indian GDP are unfounded by the data and hence have no basis.
Thalinomics: Food plate economy in India
- There is an attempt to quantify how much the common person pays for a plate across India.
- 2015-16 can be considered as the year when food price behavior changed.
- In all the four regions of India, we see that the price of vegetarian plate has decreased significantly from 2015-16, although the price has increased in 2019-20.
- After 2015-16
- In the case of vegetarian thali, the average family has benefited by about 11,000 rupees on average due to the reduction in the food price.
- The family which eats two non-vegetarian thali on an average has benefited about Rs 12,000 during the same period.
- From 2006-07 to 2019-20
- The affordability of vegetarian thali has been improved by 29 percent.
- The affordability of non-vegetarian dishes has improved by 18 percent.
India’s economic performance in 2019-20
- India’s GDP stood at 4.8 percent in the first half of 2019-20 due to weak global manufacturing, trade and demand.
- Real consumption growth improved in the second quarter. The reason for this is the increase in government consumption.
- Growth in agriculture and allied activity, public administration, defense and other services in the first half of 2019-20 was higher than the second half of 2018-19.
- The current account deficit narrowed to 1.5 percent of GDP in the first half of 2019-20. Whereas it was 2.1 percent in 2018-19.
- Foreign direct investment improved.
- Portfolio flow strengthened.
- Foreign exchange reserves strengthened.
- Imports decreased compared to exports in the first half of 2019-20.
- Inflation will come down by the end of the year.
- It increased from 3.3 percent in the first half of 2019-20 to 7.35 percent in December.
- The increase in CPI and WPI indicates that demand has increased.
- The slowdown in the growth cycle is the reason for the slowdown in GDP.
- The following reforms were made during 2019-20 to boost investment consumption and exports.
- Insolvency process (bankruptcy and bankruptcy unionity) accelerated
- The fiscal deficit of states is within the scope set by the FRBM Act.
- The review states that governments (center and state) are on the path of financial strength.
- Balance of Payments (BOP) :
o India’s BoP situation has improved. It had $ 412.9 billion foreign exchange reserves in March 2019, while it increased to $ 433.7 billion at the end of September, 2019.
o Current Account Deficit (CAD) declined from 2.1 percent of GDP in 2018-19 to 1.5 percent in the first half of 2019-20.
o Foreign exchange reserves stood at $ 461.2 billion as of January 10, 2020.
- Global business
o Global trade is projected to grow at a rate of 1.0 percent in line with the projected growth of 2.9 percent in global production in 2019, while in 2017 it reached a peak level of 5.7 percent.
o However, with recovery in global economic activity, it is expected to recover to 2.9 percent in 2020.
- India’s merchandise trade balance has improved from 2009-14 to 2014-19. However, most of the improvement in the later period was due to a 50 per cent drop in crude prices in 2016-17.
o India’s top five trading partners are the United States, China, United Arab Emirates (UAE), Saudi Arabia and Hong Kong.
o Top export items – petroleum products, precious stones, drug prescriptions and organic, gold and other precious metals.
o Largest export destinations in 2019-20 (April-November): USA, followed by United Arab Emirates (UAE), China and Hong Kong.
o There has been a decrease in the ratio of GDP and export of merchandise goods which negatively impacted the BoP situation.
o Decreasing world production has had an impact on decreasing exports and GDP ratio, especially during the first half of 2018-19 to 2019-20.
o There has been a significant decrease in growth in non-POL exports from 2009–14 to 2014–19.
o Top import items – raw petroleum, gold, petroleum products, coal, coke and briquettes.
o India’s maximum imports will continue to be from China, followed by the US, UAE and Saudi Arabia.
o There has been a decline in the merchandise import and GDP ratio for India which will have a net positive impact on the BoP.
- Imports of crude oil in the form of imports link India’s total imports to crude oil prices. An increase in the price of crude oil increases the share of crude oil in total imports, increasing the import and GDP ratio.
- Gold imports link India’s total imports with gold prices, but despite the increase in prices in the first half of 2018-19 and 2019-20, the share of gold imports in total imports remained the same. This was probably due to the increase in import duty, which led to a decrease in gold imports.
- Non-POL-non-gold imports are positively associated with GDP growth.
o When the GDP rate increased from 2009-14 to 2014-19, non-POL-non-oil imports as a GDP ratio declined.
o This is possible due to consumption-induced growth, while investment rate declined and non-POL-non-gold imports decreased.
o Continuous decline in investment rate led to lower GDP growth, consumption weakness, investment scenario depressed, resulting in lower GDP as well as GDP ratio from first half of 2018-19 to 2019-20 Non-POL-non-gold imports declined.
- India improved its ranking in 2019 and India’s ranking to 68 as compared to the 143 ranking of 2016 under Trade Assistance. The ‘ Trading a Cross Borders ‘ index is monitored by the World Bank in the Business Accessibility Report .
- Logistics Industry of India
o It is currently worth about $ 160 billion.
o It is expected to increase to $ 215 billion by 2020.
o India ranked 44th in the world in 2018 according to the Logistics Performance Index of the World Bank. India’s rank was 54th in 2014.
- Total FDI arrivals remained strong in 2019-20. The first six months attracted an investment of $ 24.4 billion. This was over the same period of 2018-19.
- The receipt of money from NRIs living abroad continued to increase. In the first half of 2019-20, $ 38.4 billion was received, which is more than 50 percent from the level of the previous year.
- External debt:
o It stood at a low of 20.1 percent of GDP at the end of September 2019.
o India’s external liabilities (debt and equity) increased in comparison to GDP at the end of June 2019, after declining from 2014-15. This was due to FDI portfolio inflows and growth in external commercial borrowings (ECBs).
Monetary management and financial intermediation
- Monetary Policy:
o Reconciled in 2019-20.
o Repo rate was cut by 110 basis points in four meetings of the MPC in the financial year due to low growth and low inflation.
o But there was no change in the fifth meeting held in December 2019.
- The cash position remained weak in the first two months of 2019-20 ; But after some time it became convenient.
- Gross non-performing advance ratio :
o Scheduled commercial banks between March and December 2019 remained unchanged at 9.3 percent.
o Non-banking financial corporations (NBFCs) increased marginally from 6.1 percent in March 2019 to 6.3 percent in September 2019.
- Credit enhancement :
o Financial inflows to the economy remained limited as credit growth declined for both banks and NBFCs.
o Bank loan growth was 12.9 percent in April 2019 which increased to 7.1 percent on December 20, 2019.
- The risky asset ratio of capital to SCB increased from 14.3 percent to 15.1 percent between March 2019 and September 2019.
Price and inflation
- Inflation Trends :
o Inflation controlled after 2014
o Consumer Price Index (CPI) inflation rose from 3.7 percent in 2018-19 (April to December, 2018) to 4.1 percent in 2019-20 (April to December, 2019).
o Wholesale price index inflation fell from 4.7 percent in 2018-19 (April to December, 2018) to 1.5 percent in 2019-20 (April to December, 2019).
- CPI – drivers of mixed (C) inflation :
o The major drivers during 2018-19 were the Millejule Group.
o Food and beverages made major contributions during 2019–20 (April – December).
o Due to low base effect in food and beverages and production bottlenecks such as untimely rainfall, prices of vegetables and pulses remained very high.
- Cobb-web experience for pulses :
o The farmers decided to sow their new seeds at the prices seen in the previous marketing period.
o The need to make procurement more effective under measures taken to protect farmers such as Price Stabilization Fund (PSF), Minimum Support Price (MSP).
- Difference between wholesale and retail price.
o Monitoring of essential agricultural commodities in the four metros of the country from 2014 to 2019.
o High level of discrepancies for vegetables like onions and tomatoes may have been due to the presence of middlemen and high transaction value.
- Price volatility
o The prices of essential food items declined, except for a few pulses, in the period 2014–19 as compared to the period 2009–14 .
o Low volatility can be an indicator of the presence of better marketing channels, storage facilities and effective MSP system.
- Regional difference
o CPI-C inflation has varied between states. It has been between (-) 0.04 percent to 8.1 percent in States / UTs in the FY 2019-20 (April-December).
o CPI-C inflation in rural areas is lower than CPI-C inflation in urban areas in most states.
o All states differ more in rural inflation than urban inflation.
- Inflation dynamics
o Convergence in headline inflation and core inflation as per CPI-C data from 2012 onwards.
Sustainable Development and Climate Change
- India is moving forward on the path of SDG implementation through a well-made program.
- SDG India Index:
o Himachal Pradesh, Kerala, Tamil Nadu and Chandigarh leading states
o Assam, Bihar and Uttar Pradesh in the aspirational category
- India hosted COP-14 under UNCCD, which adopted the Delhi Declaration: Investment in land and opening up opportunities.
- COP-25 under UNFCCC in Madrid
o India reiterated its resolve to implement the Paris Agreement
o COP-25 decisions include ending climate change, adopting and implementing implementation measures of developed countries by developing countries’ parties.
- Forest and tree cover
o It increased to 80.73 million hectares
o 24.56 percent geographical area of the country.
- The increase in pollution level and decline in air quality due to burning of agricultural residues is still a matter of concern. However due to various efforts the incidence of burning of agricultural residues has come down.
- International Solar Alliance (ISA)
o Institutionalize 30 fellowships from member countries
o $ 2 billion loan from Exim Bank of India and $ 1.5 billion loan from AFD France
o ‘ Incubator ‘ by programs like Solar Risk Elimination
o ‘ Accelerator ‘ by developing measures for total demand of 116 MW solar and 2.7 lakh solar water pumps
- Agriculture and Food Management
- The bulk of the Indian population relies directly and indirectly on agriculture for employment opportunities compared to other sectors.
- The share of agriculture and allied sectors in the total value addition (GVA) of the country is declining due to higher growth of non-agricultural sectors. This is a natural result of the development process.
- Estimates of 2.8 percent increase in GVA at basic values of 2019-20 from agriculture, forestry and fisheries sector
- Reduced level of machineryization in agriculture hinders agricultural productivity. The machineryisation of agriculture in India is 40 percent, much lower than China’s 59.5 percent and Brazil’s 75 percent.
- Inequality in regional distribution of agricultural credit in India
o Less credit in the hill and northeastern states (less than 1 percent of the total agricultural credit distribution).
- Livestock income is another important income tool for millions of rural families
o Important role in achieving the goal of doubling farmers’ income
o Livestock sector has been growing at a rate of 7.9 percent of CAGR during last 5 years
- Growth in food processing industry sector during the last six years ended 2017-18
o Average annual growth rate (AAGR) of about 5.06 percent
o Manufacturing and agriculture sector share in GVA at 8.83 per cent and 10.66 per cent respectively in 2017-18 at 2011-12 prices
- Although there is a need to safeguard the interests of weaker sections of the population, the following measures have been emphasized in the Economic Review to stabilize the food security situation.
o To solve the problem of rising food subsidy bill
o Revision of rates and coverage under NFSA
- Industry and Infrastructure
- The industrial sector registered a growth of 0.6 percent as per the Index of Industrial Production (IIP) during 2019-20 (April-November) as compared to 5.0 percent in 2018-19 (April-November).
- 4 percent growth in fertilizer sector during 2019-20 (April-November) compared to (-) 1.3 percent in 2018-19 (April-November).
The steel sector has recorded a growth of 5.2 percent during 2019-20 (April-November), while it was 3.6 percent during 2018-19 (April-November).
· Total telephone connections reached 119.43 million in India on September 30, 20l9.
· Increase the installed capacity of power generation went to Oct. 31, 364 960 MW in 2019, which was 356,100 MW as of March 31, 2019.
In the report of the Task Force on the National Infrastructure Pipeline released on December 31, 2019, India has projected a total infrastructural investment of Rs 102 lakh crore during FY 2020 to 2025.
· The importance of the service sector in the Indian economy is growing :
o It has a share of 55 per cent in Gross Promotion Value and Gross Promotion Price Growth.
o Two-thirds of India’s total FDI.
o About 38 percent of total exports.
o Out of 33 states and union territories, the contribution of service sector in 15 states is more than 50 percent.
· Increase of gross value added in the services sector declined in 2019-20.
· Have went seen strong improvement in gross FDI in the services sector at the beginning of 2019-20.
Social Infrastructure, Employment and Human Development
· Center and social services by the state (health, education and other) increased from 6.2 percent in 2014-15 expenses as a proportion of GDP in 2019-20 is 7.7 percent (GDP).
· Went to more than 130 in 2017, India’s ranking in the human development index of 129 in 2018.
o India ranks among the countries with the fastest improvement, with an average 1.34 percent increase in the annual human development index.
There is a need to improve the gross enrollment ratio at the secondary, higher secondary and higher education levels.
· 5 per cent increase in the share of regular wage / salaried employees went to enter, which went to 23 percent, compared to 18 percent in 2011-12 to 2017-18.
o An important achievement in this category is the creation of about 2.62 crore new jobs, including 1.21 crore in rural areas and 1.39 crore new jobs in urban areas.
The total formal employment in the economy increased by 9.98 percent in 2017-18 as compared to 8 percent in 2011-12.
· Girl due to a decline in the participation of the labor force by gender inequality in India’s labor market has grown. Particularly in the rural sector and about 60 percent of the productivity age (15-59) groups are engaged in full-time domestic work.
· Country ayushmaan improved access to other health services through India and mission rainbow.
· Mission immunize 3.39 million children and 87.18 million pregnant women in 680 districts across the country under the rainbow.
· Close to 96 percent of households in approximately 76.7 per cent and urban villages are strong at home.
· Went to change the hygiene behavior and the introduction of a 10-year-old rural sanitation strategy (2019-2029) for the purpose of emphasis on increasing access to solid and liquid waste management.
Economic Survey 2019-20: Highlights
Why in News
The Economic Survey 2019-20 has been tabled in the Parliament by the Union Minister for Finance.
- The theme of Economic Survey 2019-20 is “India’s aspiration of #Economy@5trillion with its theme of #WealthCreation”.
- The Economic Survey is a report that the government presents on the state of the economy in the past one year, the key challenges it anticipates, and their possible solutions.
- It is a crucial document as it provides a detailed, official version of the government’s take on the country’s economic condition.
- The document is prepared by the Economic Division of the Department of Economic Affairs (DEA) under the guidance of the Chief Economic Adviser (CEA), currently Dr Krishnamurthy Subramanian.
- It needs to be noted that the government is not constitutionally bound to present the Economic Survey or to follow the recommendations that are made in it.
- The Survey makes an attempt to craft a framework of policies that can foster wealth creation in India, which in turn, would set the economy firmly on an upward growth trajectory.
- The Survey identifies several levers for furthering Wealth Creation, which are:
- Grassroot Entrepreneurs: Entrepreneurship as a strategy to fuel productivity growth and wealth creation.
- Competitive Market: Promote ‘pro-business’ policies that unleash the power of competitive markets to generate wealth as against ‘pro-crony’ policies that may favour incumbent private interests.
- Remove anachronistic government interventions: Eliminate policies that undermine markets through government intervention, even where it is not necessary.
- Assemble in India: Integrate ‘Assemble in India’ into ‘Make in India’ to focus on labour intensive exports and thereby create jobs at a large scale. India should focus on other labour intensive sectors such as textile, clothing, footwear and toys.
- Banking: Efficiently scale up the banking sector to become proportionate to the Indian economy and track the health of the shadow banking sector (NBFCs).
- Privatization: Use privatization to foster efficiency and thus bolster the case for aggressive disinvestment of CPSEs.
Market Enables Wealth Creation
- The Survey lays stress on the importance of bringing an openness in the market that leads to wealth creation, in turn, boosting the economic activity through increased investment.
- India’s historical dominance on the global economy is the result of two factors: ‘Invisible Hand of Market’ and ‘Trust’. E.g. Indian economy returned to high growth trajectory post economic liberalisation.
- Trust is a public good that increases with use.
- The Survey makes an attempt to relate economics to the common person using something that an individual encounters every day – a plate of food i.e a Thali.
- Affordability of Thalis vis-à-vis a day’s pay of a worker has improved over time, indicating improved welfare of the common person.
Economic Survey 2019-20: Key Figures
- GDP growth pegged at 6-6.5% for 2020-21, up from 5% in 2019-20. The Survey also said that India’s GDP growth is not overstated.
- Government Expenditure
- The Survey called for rationalization of non-committed revenue expenditures like subsidies as a considerable proportion of revenue expenditure like interest payments, wages and salaries and pensions is committed.
- However, the Survey has also warned against cutting capital expenditure.
- Share of formal employment increased from 17.9% in 2011-12 to 22.8% in 2017-18 reflecting formalization in the economy.
- In 2018, India witnessed an increase of about 80 % in the creation of new firms in comparison to 2014. As per World Bank’s data on Entrepreneurship, India ranks third in the number of new firms created.
- Inflation declines sharply from 3.2% in April 2019 to 2.6% in December 2019, reflecting weakening of demand pressure in the economy.
- It needs to be noted that when demand surpasses supply, it leads to higher prices i.e. Demand pull inflation.
- India’s Balance of Payments (BoP)
- The Balance of Payments position improved to USD 433.7 billion in September 2019 because of narrowing Current Account Deficit (CAD) which is 1.5% of GDP in the first half of 2019-20.
- Foreign Direct Investment: Net FDI inflows remained buoyant attracting USD 24.4 billion in the first eight months of 2019-20, much higher than the corresponding period of 2018-19.
- Net overseas remittances in the first half of 2019-20 were more than 50% of total receivables in 2018-19, standing at USD 38.4 billion.
- As per World Bank report of 2019, India’s 17.5 million diaspora made it the top remittance-recipient country in 2018.
- Merchandise Trade
- India’s merchandise trade balance improved from 2009-14 to 2014-19, although most of the improvement in the latter period was due to more than 50% decline in crude prices in 2016-17.
- India’s top five trading partners continue to be USA, China, UAE, Saudi Arabia and Hong Kong.
- Performance of Key Sectors
- Industrial Sector: As per Index of Industrial Production (IIP), the sector registered a growth of 0.6% in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November).
- Service Sector: The Services Sector accounted for about 55% of the economy and Gross Value Added (GVA) growth, two-thirds of total FDI inflows into India and about 38% of the total exports.
- Agriculture sector
- The share of agriculture and allied sectors in the total GVA of the country has been continuously declining on account of relatively higher growth performance of non-agricultural sectors, a natural outcome of development process. Also, livestock income has become an important secondary source of income for millions of rural families.
- Agricultural productivity is also constrained by lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %).
- Ease of Doing Business: Suggestions for Improving Rank in Ease of Doing Business (Rank 63 in 2019)
- Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.
- Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.
Economic Survey 2019-20: Banking Sector, Credit and Capital Market
- India has the second largest emerging green bond market after China.
- Monetary policy remained accommodative in 2019-20. Accommodative monetary policy occurs when a central bank attempts to expand the overall money supply to boost the economy when growth is slowing (as measured by GDP).
- The financial flows to the economy remained constrained as credit growth declined for both banks and Non-Banking Financial Corporations (NBFCs).
- Gross Non Performing Advances Ratio
- Remained unchanged for Scheduled Commercial Banks (SCBs) at 9.3% between March and September 2019.
- Increased slightly for the NBFCs from 6.1% in March 2019 to 6.3% in September 2019.
- Capital to Risk-weighted Asset Ratio of SCBs increased from 14.3% to 15.1% between March 2019 and September 2019.
- The General Government (Centre plus States) has been on the path of fiscal consolidation. Fiscal consolidation is a policy aimed at reducing government deficits and debt accumulation.
- India has only one bank in the global top 100. The Survey observes 2019 as the golden jubilee year of bank nationalization.
- PSBs are inefficient compared to their peer groups on every performance parameter.
- Employee Stock Ownership Plan (ESOP) for PSBs’ employees
- Representation on boards proportionate to the blocks held by employees to incentivize employees and align their interests with that of all shareholders of banks.
- Creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.
- The Economic Survey has suggested the use of a ‘health score’ index for NBFCs which can help in detecting early signs of impending liquidity risks.
Economic Survey 2019-20: Social Infrastructure, Employment and Human Development
- Employment and Income
- Largest proportion of Indian population depends directly or indirectly on agriculture for employment opportunities as compared to any other sector.
- The share of regular wage/salaried employees has increased by 5 percentage points from 18% in 2011-12 to 23% in 2017-18.
- Gender disparity in India’s labour market widened due to decline in female labour force participation, especially in rural areas.
- Government Expenditure on Social Services
- The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2% in 2014-15 to 7.7% in 2019-20.
- Access to health services inter-alia through Ayushman Bharat and Mission Indradhanush across the country has improved and a 10 Year Rural Sanitation Strategy (2019-2029) launched to focus on sustaining the sanitation behavior change and increasing access to solid and liquid waste management.
- Burning of agricultural residues, leading to rise in pollutant levels and deterioration of air quality, is still a major concern, though the total number of burning events recorded reduced due to various efforts taken.
- All urban areas of 35 States/UTs have become Open Defecation Free (ODF) and percentage of waste processing rose from around 18% to 60%.
- The Survey emphasizes on sustainability of food security operations by:
- Addressing the burgeoning food subsidy bill.
- Revisiting the rates and coverage under National Food Security Act (NFSA).
- Privatization of Education
- The Survey proposes privatization of education at all levels as a policy initiative to fast-track entrepreneurship and consequently wealth creation.
- It links literacy levels to start-up activity and cites the example of the eastern parts of the country, which have the lowest literacy rate of about 59.6% and also the lowest rate of new firms being set up.
Economic Survey 2019-20 Quiz
1. The Economic Survey 2019-20 has projected how much GDP Growth for fiscal year 2020-21?
a) 5-5.5 percent
b) 6-6.5 percent
c) 5-6 percent
d) 5-6.5 percent
2. What is the estimated Industrial growth for fiscal 2019-20?
a) 2.5 percent
b) 3.5 percent
c) 4.5 percent
d) 3 percent
3. What is the projected growth rate for agriculture in Fiscal Year 2019-20?
a) 3.4 percent
b) 2.5 percent
c) 2.1 percent
d) 2.8 percent
4. What is the over-arching theme of Economic Survey 2019-20?
b) Wealth Creation
c) Industrial Reforms
d) Start-up Innovation
5. Which term was used to describe the economics of a plate of food in India in the Economic Survey 2019-20?
6. The Economic Survey 2020 suggests Employee Stock Ownership for which sector?
7. How many new jobs were created in India between 2011-12 and 2017-18 as per Economic Survey 2019-20?
a) 6.3 crore
b) 4.4 crore
c) 5.5 crore
d) 2.6 crore
8. As per the Economic Survey of India, how many new companies were formed in 2018?
9. How much India needs to spend on infrastructure to become USD 5 trillion economy by 2024-25?
a) USD 1.2 trillion
b) USD 1.4 trillion
c) USD 1.6 trillion
d) USD 1.8 trillion
10. The year 2019 marked the golden jubilee of which event, as per Economic Survey 2020?
a) PSU Privatisation
b) Bank Capitalisation
c) Bank Nationalisation
d) CPSE Disinvestment
1. (b) 6-6.5 percent
The Economic Survey 2019-20 has projected the GDP Growth rate to be 6% – 6.5% in fiscal year 2020-21.
2. (a) 2.5 percent
The Economic Survey 2019-20 has estimated Industrial growth to be at 2.5% in fiscal 2019-20.
3. (d) 2.8 percent
The Economic Survey 2020 has projected agriculture and its allied sectors to grow at 2.8 percent in fiscal 2019-20.
4. (b) Wealth Creation
The overarching theme of Economic Survey 2019-20 is wealth creation and the policy choices that enable the same.
5. (a) Thalinomics
The Economic Survey 2020 used the term ‘Thalinomics’ to describe economics of a plate of food in India. It throws light upon the price paid by a person for a Thali in India anywhere.
6. (b) Banking
The Economic Survey 2020 depicts that the growth of Indian Banking Sector has been inproportionate with the overall economic growth. To accelerate the growth of Banking Sector, Survey suggests the Employee Stock Ownership Plan (ESOP) for bank employees.
7. (a) 6.3 crore
According to the Economic Survey 2019-20, about 2.62 crore new jobs were created between 2011-12 and 2017-18. About 1.21 crore jobs were created in rural areas, while 1.39 crore jobs were created in urban areas.
8. (c) 1,24,000
According to the Economic Survey of India 2019-20, 1,24,000 new companies were formed in 2018. The figure was just 70,000 in 2014 that saw a growth of about 80% in 2018. Most entrepreneurship in service sector recorded in Delhi, Mizoram, Uttar Pradesh, Kerala, Andaman and Nicobar Islands and Haryana.
9. (b) 4.4 trillion
Economic Survey 2019-20 said that India needs to spend about USD 1.4 trillion on infrastructure to become a USD 5 trillion economy by 2024-25. The report highlighted that 100 more airports are to be made operational by 2023-24.
10. (c) Bank Nationalisation
The year 2019 marked the golden jubilee year of Bank Nationalisation. The Survey points out that the growth of Indian Banking Sector has not been proportionate with the overall growth of the economy.
Compiled By: S. R. Srivastav (Educator & Author)
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