Highlights of Economic survey 2020-21
Context: Finance Minister kept the Economic Survey 2020-21 in the Parliament on the first day of the Budget session. The survey, authored by Chief Economic Adviser, has analysed many topics from economic growth, fiscal stance, state of banking and more.
Topic in the syllabus: Prelims – Economy.
Highlights of Economic survey 2020-21:
- The Economic Survey has pushed for a continued expansionary fiscal stance by the government to ensure pre-Covid levels growth.
- It will increase revenue collections and help India get back on a sustainable fiscal path.
- Based on IMF estimates, the real growth rate for FY21 is taken as -7.7 per cent (MoSPI) and the real growth rate for FY22 is assumed as 11.5 per cent.
- India’s real GDP is estimated to record a growth of 11.0 per cent in 2021-22 and nominal GDP by 15.4 per cent.
- the Indian economy can go past its pre-Covid level in two years through a rebound in economic activity and the government’s reforms.
- A further boost is also possible if economic activities normalise very soon due to the vaccine rollout.
- While the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been a V-shaped one as seen in the 7.5 per cent decline in Q2 and the recovery across all important economic indicators. Therefore the survey projected a V-shaped recovery.
- Despite the hard-hitting economic shock due to the global pandemic, India is going through a V-shaped recovery with a stable macroeconomic situation supported by a stable currency, comfortable current account, increasing forex reserves, and encouraging signs in the manufacturing sector output.
- The survey said that as long as GDP keeps growing, the country won’t have to worry about debt.
- The survey argues that over the last 2.5 decades, higher GDP growth makes the ratio of debt-to-GDP to decline in the case of India.
- As soon as the Covid-19 relief measures are liftedthere will bea need for a revised asset quality review of Indian banks, the survey suggested.
- The chief economic adviser pushed for a clean-up of bank books for not repeating the mistakes of the past.
- The survey has said that more focus on core inflation is necessary to drive policy-making.
- According to the survey, India’s sovereign credit ratings does not reflect its fundamentals.
- India’s administrative process is suffering from overregulation, with lack of compliance or regulatory standards, the survey noted.
- Economic growth has a greater impact on poverty alleviation than inequality. Therefore, India must continue to focus on economic growth to lift the poor out of poverty, the survey said.
- The survey recommended setting up a sectoral regulator, and a rating agency like a body, to assess the quality of healthcare providers in the country. This, the survey said, will help tackle information asymmetries.
- Economic Survey pushes for counter-cyclical fiscal policy to be an important point of emphasis, where the government steps in when the private sector performs badly and steps back when the private sector performs well.
- The Economic Survey pushed for higher research and development spending by the private sector to increase India’s innovations.