Dr Arvind Kumar*
Plenty of optimism seemingly lurks in the Economic Survey 2021-2022 tabled by the union finance minister in Parliament on 31 January projecting India to retain its tag of the world’s fastest-growing economy in the fiscal year commencing from April 2022 by registering an 8- 8.5 percent growth in the ensuing fiscal year and with a projected growth of 9.2 percent in the next fiscal year along with the widespread vaccine coverage, supply-side reforms and easing of regulations.
Nevertheless, there is also a note of caution in the Survey about risks from global inflation and pandemic-related disruptions. Moreover, the optimistic projections are based on the assumption that there would not be further debilitating pandemic-related economic disruption, monsoon will be normal, and withdrawal of global liquidity by major central banks will be orderly. However, any one of these projections going haywire is prone to turn this hope of optimism into despair for the nation.
The growth· projections envisaged in the Survey are in consonance with the forecast· by the World Bank but less than 9 percent forecast· of IMF; and are somewhat higher than that projected by S&P and Moody’s. The growth projections, as envisaged in the Survey are based on the premises of Widespread Vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. According to Sanjeev Sanyal, principal economic adviser at the finance ministry, and the lead author of Economic Survey 2021-2022, “India does not need to be wary· of imported inflation, especially from elevated global energy· prices.”
However, this assertion seems doubtful in view of the fact India imports 85 percent of its oil from abroad to meet· its energy needs. Besides, a pall of uncertainty pervades the global environment and there is also apprehension of the planned withdrawal of monetary support by major central banks, including the US Federal Reserve, and in that eventuality, higher rates elsewhere could lead to capital outflow for India. Nevertheless, the Survey is optimistic about the year ahead being well-poised for a pick-up in private investment with the financial system in a good position to provide support to the revival of the economy.
While acknowledging that with high tax buoyancy, there would be sufficient fiscal space to sustain the growth momentum of the government’s capital expenditure alongside meeting the 2021-2022 budgeted fiscal deficit of .8 percent of GDP, the Survey also notes that on the fiscal side, the major concern is going to be to calibrate a reduction path for the general government debt-GDP ratio which is estimated to touch 90 percent in 2021-2022. This scenario entails the potential of resulting in high committed expenditures on account of interest payments relative to revenue receipts, thereby squeezing the fiscal space available for capital expenditures.
Key Highlights
- GDP growth· projections for FY 23 are pegged at anticipated oil prices ranging from $ 70 – 75 /barrel, compared to the current price· of $ 90.
- The agricultural· sector is estimated to grow· at 3.9 % in FY 22 and was the least affected sector by the pandemic.
- Survey strikes a note of caution on imported inflation, due to high· international fuel· prices.
- The industrial sector expanded 11.8% in FY22, after contracting 7% in FY21.
- The services sector is expected to rise· 8.2 % in FY 22.
- Total exports are likely to grow· by 16.5 % in FY 22, exceeding pre-pandemic levels, and imports by 29.4 %.
- Capex for Railways from April-November 2021 stood at Rs 65, 157 crore, while the total· outlay· for FY 22 is Rs 2.15 lakh crore.
- India’s startup ecosystem is the largest in the world after the US and China. Since 2016, startups have· created over 6 lakh jobs. 44 new unicorns were witnessed in 2021.
- Consumption has risen 7 % in FY 22, led largely by government· spending.
- Five sectors capture· around 83 % of aggregate· pipeline value: Roads (27%), Railways (25 %), Power (15 %), Oil & Gas pipelines (8 %) and Telecom (6 %).
Appraisal
Economic Survey 2021-2022 has reportedly evoked mixed reactions. From the tone and tenor of this Survey, which is reported to be prepared by Sanjeev Sanyal, currently principal economic adviser in Union Finance Ministry, as a lead author, it appears that the author has tried to play safe, not coming up with anything that could land him in trouble. According to some experts, the Survey is long on details but short on analysis and recommendations. However, the new feature of this Survey is the usage of some exotic terms, such as the waterfall method, barbell strategy agile approach.
While lamenting at the shrinking trends in the manufacturing sector since 2011-2012, with its share declining from 17.4 percent in 2011-2012 to 14.5 percent in 2020-2021 in the nation’s gross value added (GVA) and the Survey’s optimism that the share of the manufacturing sector is expected to improve to 15.3 percent in 2021-2022, one expert has termed this optimism not being grounded in reality. Alluding to reference in the Survey with regard to India’s imports from China, UAE, and the US in April-November 2021, and the reported reduction in China’s share from 17.7 percent to 15.5 percent in the corresponding period a year earlier, reflecting increased diversification of India’s import sources, the same expert opines that the said diversification could be true.
While conceding that China’s share in overall merchandise imports by India may have declined, as mentioned in the Survey, concomitantly, the same expert also has drawn attention to the fact of imports by India from China hovering around $100 billion for the first time in 2021, a figure more than the pre-Covid-19 level. Referring to India’s continued dependence on Chinese electrical and electronic goods, especially smartphones, machinery, fertilizers, active pharmaceutical ingredients or API, etc., despite the restrictions imposed by the union government on Chinese imports, the same expert says: “The Survey did underline good policy measures by the government, it was not keen on highlighting shortcomings.”
While criticizing the Economic Survey 2021-2022, former union finance minister, P. Chidambaram has termed the Survey as repeating “ad nauseum” that at the end of 2021-2022, the economy would have recovered to the pre-pandemic level of 2019-2020. In Chidambaram’s view, it means on 31 March 2022, the GDP would be at the same level as it was on 31 March 2020. Stating that the past two years had impoverished people, with loss of millions of jobs, and about 84 percent of households have suffered the loss of income and 4.6 crore people have been pushed into poverty and with India’s declining rank in the Global Hunger Index, P. Chidambaram said that it is time for contrition and change of approach and not for boasts and no change.
Way Forward
Admittedly, the Survey projects a bright future for the country’s economy; nonetheless, its growth projections are primarily based on assumptions most of which are beyond human control and if something goes awry, thereby upsetting the government’s expectations then there will be an excuse of helplessness. At this juncture, the onus lies with the government to walk the talk. In other words, the government is enjoined to strive hard to implement what has been promised diligently. There is a dire need of controlling hikes in prices, increasing government expenditure and enhancing consumers’ purchasing power. Besides, it also devolves on the government to generate employment opportunities, and to begin with all sanctioned posts that are lying vacant with the Central and state governments ought to be filled, while opening up new employment opportunities.
*Editor, Focus Global Reporter
