ECONOMIC SURVEY
– the survey might also be trying to carve out greater space for monetary policy intervention.
“While it (Survey) argues emphatically for counter-cyclical fiscal policies, comfort on debt sustainability, and unfair treatment by rating agencies, we believe the government is unlikely to drop the ball on fiscal rectitude. We expect the government to announce a fiscal deficit of 6.8% of GDP for FY21, 5.3% of GDP for FY22, and outline a fiscal roadmap that leads to gradual consolidation and stabilisation of public debt levels,” Sonal Varma and Aurodeep Nandi, economists at Nomura Global Market Research, said in a note.
But inherent in the Survey’s numbers are details of a lower devolution to states. While Budget Estimates for 2020-21 had projected an increase in devolution of states’ share in taxes from 6.56% of GDP in 2019-20 (Revised Estimates) to 7.84%, a contraction in GDP and a sharp rise in share of taxes raised through special cess and duty in the current fiscal year could mean a fall in absolute devolition to states, and a lower realisation from disinvestment. The second, a shortfall of around ₹1.9 lakh crore is understandable in a pandemic year, but the former is a matter of concern because the primary response to Covid-19 as well as alleviating distress has to come from the states.
In keeping with what is now an established tradition of the survey engaging in intellectual debates on sometimes radical economic ideas, the Survey also touched upon some crucial policy reforms in the regulatory sphere. It argued that “the problem of over-regulation and opacity in Indian administrative processes flows from the emphasis on having complete regulations that account for every possible outcome” and the “optimal solution is to have simple regulations combined with transparent decision making process”. It also underlined the need for a rollback of regulatory forbearance to cushion the impact of the pandemic, by describing it as an emergency measure. Read together with the need to initiate a second asset quality review in banks, this suggests growing policy concern over the bad debt crisis in banks, something which was highlighted in RBI’S latest Financial Stability Report. “The Economic Survey has argued extensively on growth and debt sustainability and how India’s sovereign rating is not appropriate. Since India’s debt is going to be 73.8%, the arguments of the Survey are well appointed. But it cannot be missed that unsustainable debt can put our sovereign rating under pressure and also accessing foreign capital, which is important for infra development, etc, difficult,” said Sanjay Kumar, partner, Deloitte India. “It does point out that there may be enhanced government expenditure in the coming Budget. That is good. Government should, however, be mindful to spend on creating capital assets and not on revenue expenditure. Multipler effect of capex on GDP growth is 2.45, while of the revenue expenditure it is only 0.5. Spends on infra, health, MSME financing, R&D enhancement should not be missed,” he added.
“foiled all attempts to change the status quo at the border”.
He also spoke about the initiatives to make India “atmanirbhar”, or self-reliant, and about how India fought back against the Covid-19 pandemic.
The speech — that is approved by the Union Cabinet — sharply focused on the ongoing farm protests, and a sizeable chunk of it was on the Modi government’s farmer welfare goals.
President Kovind referred to the violent incidents on Republic Day and said, “The recent acts of dishonouring the National Flag and showing disrespect to the auspicious occasion of the Republic Day are unfortunate. While the Constitution gives us the right to freedom of expression it is also expected that we abide by the laws and rules with equal sincerity.”
The President maintained that Parliament approved the “important farm reform” bills “after extensive consultation”. “The benefits of these three important farm reforms have started reaching more than 10 crore small farmers instantly. Appreciating the advantages that these reforms would bring to the small farmers, several political parties too had, from time to time, expressed their support,” he said.
“My government holds in high esteem the values of democracy and sanctity of the Constitution. It is continuously making efforts to dispel the misunderstanding created in the context of these laws,” said Kovind, indicating the government’s willingness to engage with the farmers.
The Opposition, however, disagreed with this contention. Hours later, Congress leader Rahul Gandhi said in a media briefing: “The first law destroys the agricultural markets, second one allows unlimited storage of grain that will make it practically impossible for our farmers to negotiate their prices, and the third law basically says that if the farmers have grievance they cannot go to court.”
The Opposition has also maintained the farm bills were given a hasty passage without consultations, but Kovind said “the discussions over these farm reforms in every part of the country for over two decades and the demand for these reforms at different fora were also reflected during the deliberations in the House”.
The President also hailed India’s military capabilities as he noted how attempts were made to challenge the country’s capability at the border at a time when the country was grappling with the coronavirus pandemic.
“...our security forces not only responded to these machinations with promptitude, force and courage, but also foiled all attempts to change the status quo at the border,” he said.
“The restraint, valour and courage displayed by our jawans deserve utmost praise... Every citizen is deeply indebted to these martyrs,” the President said.
In the speech, Kovind also stated that India has “emerged on the global stage with renewed vigour” amid the pandemic, and the government’s “timely and calibrated decisions” saved “lives of lakhs of our countrymen”.