Survey asks Centre to splurge to boost growth
CEA seeks cut in food subsidy by reviewing PDS prices; predicts higher growth next fiscal
Bating for massive wealth creation in the country, the Economic Survey 2020 on Friday said that the country’s economy would grow by six or 6.5 per cent in the fiscal year starting April 1, 2020. The economic growth for FY20 would remain at five per cent.
The Survey — tabled by finance minister Nirmala Sitharaman a day before the Union Budget for 202021 — also called for measures to attain $5-trillion economy by 2024.
The Survey also made a case for relaxing the fiscal deficit target of 3.3 per cent of GDP in view of the need to arrest declining growth, estimated to touch an 11year low of five per cent in the current fiscal.
Apart from asking the government to consider reducing food subsidy, the Survey has called upon people to look at businessmen with respect as they create wealth and jobs.
The Survey, authored by Chief Economic Adviser Krishnamurthy Subramanian, also introduced 10 new ideas to boost growth, including wealth creation that benefits all, markets enable wealth creation, trust is a public good that increases with use, grassroot entrepreneurs that create wealth in their districts, pro-business policies give equal opportunity, remove anachronistic government interventions, job creation etc.
Listing global trade tensions and oil prices rising from an escalation in USIran standoff as downside risks to growth, the Survey also pointed out that the GDP growth of India should strongly rebound in
2020-21 on a low statistical base of five per cent growth in 2019-20. Amid soaring expenditure on account of big ticket announcements and shrinking revenue in
2019, the government targeted to contain the fiscal deficit at `7.04 lakh crore or 3.3 per cent of gross domestic product or GDP, in the financial year ending March 2020, from `6.49 lakh crore or 3.4 per cent of GDP in the previous year.
Despite the global slowdown, Ms Subramanian is confident that economic slowdown has bottomed out. However, he rejected his predecessor Arvind Subramanian’s analysis of India’s GDP growth rate being overestimated by 2.7 per cent post-2011, saying the allegation was ‘unfounded’ and ‘unsubstantiated by the data’.
“If you look at the business cycle phenomena in India, typically if you look at the peaks and troughs and co-relate it with what has happened, it seems like we have hit the trough therefore there should be uptick in growth,” he told reporters on Friday.
Amidst a weak environment for global manufacturing, trade and demand, the Indian economy slowed down with GDP growth moderating to 4.8 per cent in the first half of 2019-20, lower than 6.2 per cent in H2 of 2018-19. When asked if there is any change in meeting $5-trillion target by 2024, Subramanian said, “To best of my knowledge, there is no change in deadline.”
Subramanian also said by focusing on labour intensive sector, India can create 4 crore jobs by 2025 and 8 crore jobs by 2030. “The banking sector needs to scale up and become proportional to the size of the economy. The exponential rise in India’s GDP and GDP per capita post liberalisation coincides with wealth generation in the stock market,” he said.
Interestingly, the Survey also traced the country’s history, right from the ancient texts such as Arthashastra and Thirukural to contemporary times and the problem of bad loans. It also drew the connection between the invisible hand of the market, the hand of the trust and how it can contribute to India’s target of becoming a $5-trillion economy.
Referring to the four ancient objects of human pursuit — Dharm, Arth, Kaam and Moksh, Subramanian said, “Arth or wealth is among these noble pursuits. The colour lavender also suggested measures like increasing government spending and tax cuts.”
The Survey also introduced the concept of trust as a public good that gets enhanced with greater use and suggested that policies must empower transparency and effective enforcement using data and technology to enhance this public good. “Pro-business practices can help promote the invisible hand of the market. In a market economy too, there is need for state to ensure a moral hand to support the invisible hand,” the Survey emphasised.
Facing the worst economic slowdown since the global financial crisis of 2008-09, the Survey called for boosting manufacturing with ‘assemble in India for the world’ concept so as to boost job creation. For the current fiscal, it projected a GDP growth of 5 per cent, the lowest in 11 years, p and worsening job prospects.
“The deceleration in GDP growth can be understood within the framework of a slowing cycle of growth with the financial sector acting as a drag on the real sector. The government must use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 202021,” it said.