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Economic Survey 2018-19 : $5 trillion economy by 2024-25, emphasis is on “Virtuous Cycle” of investment, jobs and exports

India will still be the fastest growing major economy in 2018-19

A day before the Union Budget to be presented in the Parliament, Union Finance Minister Nirmala Sitharaman on Thursday tabled the Economic Survey in both Houses of Parliament Thursday.

The Economic Survey 2018-19 has projected the GDP growth for 2019-20 at 7-7.75%, up from 6.8 per cent in the previous fiscal, reinstating India as the world’s fastest-growing major economy. The fiscal deficit estimate for 2018-19 has been retained at 3.4 per cent of the GDP, the same as projected in the interim Budget.

State of the Economy in 2018-19:

The survey projects the “State of the Economy in 2018-19” stating that India will still be the fastest growing major economy in 2018-19. The Non-Performing Assets as a percentage of Gross Advances has reduced to 10.1 per cent at end December 2018 from 11.5 per cent at end March 2018.

Investment growth has been recovering since 2017-18 with 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. The Current account deficit (CAD) is also manageable at 2.1 per cent of GDP. The fiscal deficit of the Central Government has declined from 3.5 per cent of GDP in 2017-18 to 3.4 per cent in 2018-19.

Money Management and Financial Intermediation:

The Survey suggests that the country’s banking system has improved as NPA ratios have declined and credit growth accelerated. The major reforms initiated by Narendra Modi government like Insolvency and Bankruptcy Code led to recovery and resolution of a significant amount of distressed assets and improved business culture.

According to the survey, the Corporate Insolvency Resolution Process (CIRP) has yielded a resolution of 94 cases involving claims worth Rs. 1,73,359 crore till March 31, 2019. As on 28 Feb 2019, 6079 cases involving Rs 2,84,000 lakh crores have been withdrawn. As per RBI reports, Rs.50,000 crore received by banks from previously non-performing accounts.

Prices and Inflation:

The Headline inflation based on CPI-C continuing on its declining trend for the fifth straight financial year remained below 4.0 per cent in the last two years. The Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend for the fifth financial year has remained below 2.0 per cent for the last two consecutive years. The

The CPI-C based core inflation (CPI excluding the food and fuel group) has now started declining since March 2019 after incrementing during the fiscal year 2018-19 as compared to  2017-18.

External Sector:

The Survey predicts that as per WTO projection, World trade growth has slowed down to 3 per cent in 2018 from 4.6 per cent in 2017 due to four major reasons. First, the introduction of new and retaliatory tariff measures, secondly, the heightened US-China trade tensions. Thirdly, the weaker global economic growth hampering global trade and finally, the volatility in financial markets has an effect on international trade and investments.

The silver lining for India is that it has reduced the country’s external debt to US$ 521.1 billion at end-December 2018, 1.6 per cent lower than its level at end-March 2018. The total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 per cent in 2015 to about 38 per cent at the end of 2018.

Agriculture and Food Management:

The Economic Survey states that the agriculture sector in India typically goes through cyclical movement in terms of its growth. The 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.

The Gross Capital Formation (GCF) in agriculture as a 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.

Interestingly, the Women’s participation in agriculture has 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.

Industry and Infrastructure:

The survey says that the overall Index of Eight Core Industries registered a growth rate of 4.3 per cent in 2018-19. The country has improved its Ease of Doing Business ranking by 23 to 77 position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.

The infrastructure sector has seen growth as road construction grew at 30 km/day in 2018-19 compared to 12 km/day in 2014-15. The 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 crores in 2018-19. The installed capacity of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in 2018.

Services Sector:

The 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 has seen a growth of 8.4 per cent in 2017-18 to US$ 167 billion and is estimated to reach US$ 181 billion in 2018-19. However, the services sector growth declined marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.

The Services sector provided employment to 34 per cent of the total workforce in the country for the year 2017. The tourism sector has grown marginally with 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.

Social Infrastructure, Employment and Human Development:

The public investments in social infrastructure like education, health, housing and connectivity are critical for inclusive development, states the Economic Survey 2018-19.

The Government expenditure (Centre plus States) as a percentage of GDP has increased in Health by 1.5 per cent in 2018-19 from 1.2 per cent in 2014-15. The spending on Education is also increased from 2.8 per cent to 3 per cent during this period.

There is substantial progress in both quantitative and qualitative indicators of education is reflected in the improvements in Gross Enrolment Ratios, Gender Parity Indices and learning outcomes at primary school levels.

The net employment generation in the formal sector was higher at 8.15 lakh in March 2019 as against 4.87 lakh in February 2018 as per EPFO.

Around 1,90,000 km of rural roads constructed under Pradhan Mantri Gram Sadak Yojana (PMGSY) since 2014. About 1.54 crore houses completed under Pradhan Mantri Awas Yojana (PMAY) as against a target of 1 crore pucca houses with basic amenities by 31 March 2019.

The first volume of the Economic Survey 2018-19 outlines the ‘strategic blueprint’ to achieve Prime Minister’s Vision for $5 trillion Economy. The Survey in its theme speaks about enabling to “shifting of gears” to achieve the objective of becoming India a $5 trillion economy by 2024-25.


The Survey recommends creating a virtuous cycle encompassing private investment, jobs, exports and demand. The 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.

The Survey also lays out an ambitious agenda for inducing behavioural change through the principles of Behavioural economics.

The Survey states that sustained real GDP growth rate of 8% is needed for a $5 trillion economy by 2024-25. The major emphasis is on “Virtuous Cycle” of savings, investment and exports catalyzed and supported by a favourable demographic phase required for sustainable growth. The survey states that Private investment is a key driver for demand, capacity, labour productivity, new technology, creative destruction and job creation.

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