Thursday, January 23, 2020


The Economic Survey 2018-19: Focus on dairying, livestock and fisheries
Friday, 05 July, 2019, 12 : 00 PM [IST]
Our Bureau, New Delhi
Union Minister for Finance and Corporate Affairs Nirmala Sitharaman tabled the Economic Survey 2018-19 in Parliament on Thursday. The highlights of the survey are as follows:

Shifting gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand
Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the bottom of the pyramid.
Sustained real GDP growth rate of 8% needed for a $5 trillion economy by 2024-25.
“Virtuous Cycle” of savings, investment and exports catalysed and supported by a favourable demographic phase required for sustainable growth.
Private investment- key driver for demand, capacity, labour productivity, new technology, creative destruction and job creation.
Survey departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.
Key ingredients for a self-sustaining virtuous cycle:
Presenting data as a public good.
Emphasising legal reforms.
Ensuring policy consistency.
Encouraging behaviour change using principles of behavioral economics.
Nourishing MSMEs to create more jobs and become more productive.
Reducing the cost of capital.
Rationalising the risk-return trade-off for investments.

Policy for Real People, Not Robots: Leveraging the Behavioral Economics of “Nudge”
Decisions by real people deviate from impractical robots theorised in classical economics.
Behavioral economics provides insights to ‘nudge’ people towards desirable behaviour.
Key principles of behavioral economics:
Emphasising the beneficial social norm.
Changing the default option.
Repeated reinforcements.
Using insights from behavioral economics to create an aspirational agenda for social change:

Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth
Survey focusses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.
Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organised firms in manufacturing by number.
Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.
Large firms (more than 100 employees) account for 75% employment and close to 90% of productivity despite accounting for about 15% by number.
Unshackling MSMEs and enabling them to grow by way of:
A sunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.
Deregulating labour law restrictions to create significantly more jobs, as evident from Rajasthan.
Recalibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
Survey also focusses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, and entertainment for job creation.

How does Policy Uncertainty affect Investment?
Significant reduction in Economic Policy Uncertainty in India over the last one decade, even when economic policy uncertainty increased in major countries, especially the US.
Uncertainty dampens investment growth in India for about five quarters.
Lower economic policy uncertainty can foster a salutary investment climate.
Survey proposes reduction in economic policy uncertainty by way of:
Consistency of actual policy with forward guidance.
Quality assurance certification of processes in government departments.

State of the Economy in 2018-19: A Macro View
India still the fastest growing major economy in 2018-19.
Growth of GDP moderated to 6.8 per cent in 2018-19 from 7.2 per cent in 2017-18.
Inflation contained at 3.4 per cent in 2018-19.
Non-Performing Assets as percentage of Gross Advances reduced to 10.1 per cent at end December 2018 from 11.5 per cent at end March 2018.
Investment growth recovering since 2017-18:
Growth in fixed investment picked up from 8.3 per cent in 2016-17 to 9.3 per cent next year and further to 10.0 per cent in 2018-19.
Current account deficit manageable at 2.1 per cent of GDP.
Fiscal deficit of Central government declined from 3.5 per cent of GDP in 2017-18 to 3.4 per cent in 2018-19.Prospects of pickup in growth in 2019-20 on the back of further increase in private investment and acceleration in consumption.

Fiscal Developments
FY 2018-19 ended with fiscal deficit at 3.4 per cent of GDP and debt to GDP ratio of 44.5 per cent (Provisional).
As per cent of GDP, total Central government expenditure fell by 0.3 percentage points in 2018-19 PA over 2017-18:
0.4 percentage point reduction in revenue expenditure and 0.1 percentage point increase in capital expenditure.
States’ own tax and non-tax revenue displays robust growth in 2017-18 RE and envisaged to be maintained in 2018-19 BE.
General Government (Centre plus states) on the path of fiscal consolidation and fiscal discipline.
The revised fiscal glide path envisages achieving fiscal deficit of 3 per cent of GDP by FY 2020-21 and Central government debt to 40 per cent of GDP by 2024-25.

Prices and Inflation
Headline inflation based on CPI-C continuing on its declining trend for fifth straight financial year remained below 4.0 per cent in the last two years.
Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend for fifth financial year has remained below 2.0 per cent for the last two consecutive years.
CPI-C based core inflation (CPI excluding the food and fuel group) has now started declining since March 2019 after increment during FY 2018-19 as compared to FY 2017-18.
Miscellaneous, housing and fuel and light groups are the main contributors of headline inflation based on CPI-C during FY 2018-19 and the importance of services in shaping up headline inflation has increased.
CPI rural inflation declined during FY 2018-19 over FY 2017-18. However, CPI urban inflation increased marginally during FY 2018-19. Many States witnessed fall in CPI inflation during FY 2018-19.

Agriculture and Food Management
Agriculture sector in India typically goes through cyclical movement in terms of its growth.
Gross Value Added (GVA) in agriculture improved from a negative 0.2 per cent in 2014-15 to 6.3 per cent in 2016-17 but decelerated to 2.9 per cent in 2018-19.
Gross Capital Formation (GCF) in agriculture as percentage of GVA marginally declined to 15.2 per cent in 2017-18 as compared to 15.6 per cent in 2016-17.
The public sector GCF in agriculture as a percentage of GVA increased to 2.7 per cent in 2016-17 from 2.1 per cent in 2013-14.
Women’s participation in agriculture increased to 13.9 per cent in 2015-16 from 11.7 per cent in 2005-06 and their concentration is highest (28 per cent) among small and marginal farmers.
A shift is seen in the number of operational land holdings and area operated by operational land holdings towards small and marginal farmers.
89% of groundwater extracted is used for irrigation. Hence, focus should shift from land productivity to ‘irrigation water productivity’. Thrust should be on micro-irrigation to improve water use efficiency.
Fertiliser response ratio has been declining over time. Organic and natural farming techniques including Zero Budget Natural Farming (ZBNF) can improve both water use efficiency and soil fertility.
Adopting appropriate technologies through Custom Hiring Centres and implementation of ICT are critical to improve resource-use efficiency among small and marginal farmers.
Diversification of livelihoods is critical for inclusive and sustainable development in agriculture and allied sectors. Policies should focus on
Dairying as India is the largest producer of milk.
Livestock rearing particularly of small ruminants.
Fisheries sector, as India is the second largest producer.

Industry and Infrastructure
Overall Index of Eight Core Industries registered a growth rate of 4.3 per cent in 2018-19.
India’s ranking improved by 23 to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.
Road construction grew @ 30 km per day in 2018-19 compared to 12 km per day in 2014-15.
Rail freight and passenger traffic grew by 5.33 per cent and 0.64 per cent respectively in 2018-19 as compared to 2017-18.
Total telephone connections in India touched 118.34 crore in 2018-19
The installed capacity of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in 2018.
Public Private Partnerships are quintessential for addressing infrastructure gaps
Building sustainable and resilient infrastructure has been given due importance with sector specific flagship programmes such as Saubhagya scheme, PMAY etc
Institutional mechanism is needed to deal with time-bound resolution of disputes in infrastructure sector

Services Sector
Services sector (excluding construction) has a share of 54.3 per cent in India’s GVA and contributed more than half of GVA growth in 2018-19.
The IT-BPM industry grew by 8.4 per cent in 2017-18 to US$ 167 billion and is estimated to reach US$ 181 billion in 2018-19.
The services sector growth declined marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.
Accelerated sub-sectors: Financial services, real estate and professional services.
Decelerated sub-sectors: Hotels, transport, communication and broadcasting services.
Services share in employment is 34 per cent in 2017.
10.6 million foreign tourists received  in 2018-19 compared to 10.4 million in 2017-18.
Forex earnings from tourism stood at US$ 27.7 billion in 2018-19 compared to US$ 28.7 billion in 2017-18.
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