Your point-by-point guide to the Eco Survey | Economic Times

The economic survey tabled on Friday sees a robust growth of 11% for the fiscal year beginning on April 1 on the back of the nationwide vaccination and a rebound in consumer demand.India, which the International Monetary Fund singled out as a global bright spot only a few years ago, is set to contract 7.7% in this fiscal year, to March 31, the deepest contraction in four decades, the government said in the survey.The survey's projections form the basis for key figures in the budget, due to be delivered on Monday by Finance Minister Nirmala Sitharaman.Here are the highlights of the Economic Survey 2021:Growth projections and contractionGovt sees FY22 GDP growth at 11 per cent, and nominal GDP (which accounts for inflation) at 15.4 per cent. This would mark the strongest growth since India liberalised its economy in 1991, and the highest nominal growth since India's independence in 1947.The Economic Survey pegged India's economic contraction in 2020-21 at 7.7 per cent – the sharpest fall in four decades – mainly due to the nationwide lockdown to curb the Covid-19 pandemic. This matches CSO’s first advance estimates that project the economy to decelerate at 7.7 per cent in 2020-21 and RBI's projection of 7.5 per cent contraction.The fiscal pathIndia's fiscal deficit is projected to overshoot the initial estimates, 3.5% of GDP, in the financial year ending in March. "In order to sustain the recovery in aggregate demand, the government may have to continue with an expansionary fiscal stance," the report said, adding the growth recovery would facilitate buoyant revenue collections in the medium term and enable a sustainable fiscal path.Barbell strategyIn the first chapter of the Economic Survey, the CEA writes that India turned the short-term trade-off between lives and livelihoods into a win-win situation in the medium and long term, in turn saving lives and livelihoods. The survey finds a strong correlation between how stringent the lockdown was, and the number of Covid cases and resultant deaths, and furthermore a correlation to a "V-shaped" recovery.A fiscal policy without fearIndia's sovereign credit ratings do not reflect its fundamentals, claims Subramanian. "Never in the history of sovereign credit ratings has the fifth largest economy in the world been rated as the lowest rung of the investment grade (BBB-/Baa3)," he writes. The CEA concludes that India's fiscal policy should not fear ratings downgrades as a metric of fundamentals, and should instead "reflect Gurudev Rabindranath Thakur’s sentiment of a mind without fear."Expanding the pieThe relationship between inequality and growth to socio-economic outcomes are very different in India from that of advanced economies. The survey highlights that growth and inequality have similar relationships with socio-economic indicators. Subramanian says growth has a far greater impact on poverty alleviation than inequality. India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie, he writes.Health's wealthCovid-19 underlines how a healthcare crisis can become an economic and social crisis. Healthcare policy should not overweigh recent phenomenon however, believes Subramanian. There is a need for higher public spending, while healthcare infrastructure stays agile the survey suggests. The work done by the National health Mission (NHM) must continue, and there should be a sectoral regulator to supervise the healthcare sector, it adds.Agri laws and farmer welfareThe three agricultural reform legislations are designed and intended primarily for the benefit of small and marginal farmers which constitute around 85 per cent of the total number of farmers and are the biggest sufferer of the regressive APMC regulated market regime. The newly introduced farm laws herald a new era of market freedom which can go a long way in the improvement of farmer welfare in India, reads the survey.The over-regulated IndiaEvidence shows that India over-regulates the economy, which results in regulations being ineffective even with relatively good compliance. The main problem being attempts to account for every possible outcome. In an complex world, it is not possible to write regulations that account for all outcomes, says Subramanian. The solution being simplification of regulations and investment in greater supervision. He adds that transparency not only reduces purchase prices, but also provides the honest decision maker with a clean process.Can't beat china with JugaadIndia must significantly ramp up investment in R&D if it is to achieve its aspiration to emerge as the third largest economy in terms of GDP current US$. Mere reliance on “Jugaad innovation” risks missing the crucial opportunity to innovate our way into the future.Forbearance overstays its welcomeForbearance has helped borrowers tide over temporary hardships, but when continued for long after recovery has resulted in detrimental consequences for banks and the economy. Banks exploited the forbearance window to restructure loans even for unviable entities by "windowdressing" their books, the survey claims. "Forbearance represents emergency medicine" it adds, "not a staple diet". The survey suggests an asset quality review and stronger legal infrastructure for the recovery of loans.Simple bare necessitiesAccess to “bare necessities” has improved across all states in 2018, compared to 2012. Access to bare necessities is the highest in states such as Kerala, Punjab, Haryana and Gujarat, while it is the lowest in Odisha, Jharkhand, West Bengal and Tripura. Inter-State disparities in the access to the bare necessities have declined in 2018 and access has improved disproportionately more for the poorest households when compared to the richest households across rural and urban areas. This correlates well with future improvements in education indicators. PM-JAY's successPradhan Mantri Jan Arogya Yojana (PM-JAY) enhanced health insurance coverage, and the proportion of households with health insurance increased in Bihar, Assam and Sikkim from 2015-16 to 2019-20 by 89 per cent. Across all the states, the proportion of households with health insurance increased by 54 per cent for the states that implemented PM-JAY while falling by 10 per cent in states that did not. From 2015-16 to 2019-20, infant mortality rates declined by 12 per cent for states that did not adopt PM-JAY and by 20 per cent for the states that did.GST collections uptickOwing to recovery, monthly revenue collections have witnessed an uptick. The monthly GST collections have crossed the Rs 1 lakh crore mark consecutively for the last 3 months; highest ever in December 2020. However, the general govt (centre plus states) is expected to register a fiscal slippage in FY 2020-21, on account of the shortfall in revenue and higher expenditure requirements.Pharmacy of the worldTrade balance with China and US improved as imports slowed this past year. Exports of drugs and pharma, software and agriculture and allied products improved; pharma in particular holds the potential to be the pharmacy of the world. India is expected to witness current account surplus during the this financial year after a gap of 17 years.Mixed monetary policy Monetary policy remained accommodative in 2020 with repo rate having been cut by 115 bps since March 2020. Credit growth of banks slowed down to 6.7 per cent as on January 1, 2021, however the monetary transmission of lower policy rates to deposit and lending rates improved in this year.How much does a Thali cost?At the global level, inflation remained benign on the back of subdued economic activity in advanced economies. In India, headline CPI inflation averaged 6.6 per cent in 2020-21 (Apr-Dec) and stood at 4.6 per cent in December 2020 driven by rise in food inflation. Thali costs have increased between June 2020 and November 2020 after witnessing a sharp fall in the month of December.Green IndiaSustainable development remains core to India’s development strategy, says Subramanian. India has been taking proactive climate actions to fulfil its obligations, and is on track to successfully decouple its economic growth from GHG emissions, he adds. The CEA underlines the importance of climate risk insurance as an important tool for providing security against loss of livelihoods and of assets as a consequence of disasters.Building blocksThe importance of basic infrastructure facilities can not be overstated, as "In the absence of adequate infrastructure, the economy operates at a suboptimal level," the survey read. Investments won't serve a purpose if adequate infrastructure is missing, and economy would remain distant from its potential and frontier growth trajectory.