The Union Minister for Finance & Corporate Affairs, Nirmala Sitharaman presented the Economic Survey 2019-20 in the Parliament today. In this report, we shall look at some of the key highlights from the survey. Based on advance estimates, the GDP growth rate for the fiscal year 2019-2020 has been pegged at 5%. It suggests an uptick in the growth rate in the second half of the fiscal year.
As per the survey, the uptick in second half of 2019-20 is a consequence of ten positive factors like picking up of NIFTY for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.
The economy of the country is expected to rebound in 2020-21 and grow at 6.0-6.5% and the survey implores the government to deliver on reforms to expedite the strong rebound. Global factors such as the Trade War between China and the USA and geopolitical tensions between the US and Iran have been said to contribute to the slowdown in the world economy. The survey points towards the fact that the world economy grew at the slowest pace since the economic crisis of 2009.
The government said, “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 first half of 2019-20, lower than 6.2 per cent in second half of 2018-19. A sharp decline in real fixed investment induced by a sluggish growth of real consumption has weighed down GDP growth from 2nd half of 2018-19 to 1st half of 2019-20.”
In 2019-20, the central government’s fiscal deficit was budgeted at Rs. 7.04 lakh crore (3.3 per cent of GDP), as compared to Rs. 6.49 lakh crore (3.4 per cent of GDP) the previous year. Furthermore, the Good and Services Tax (GST) collections grew by 4.1 per cent for the Centre during April-November 2019. However, the uptick started in October 2019 and has sustained its momentum in November December 2019 as well.
There has also been a rise in formal employment from 17.9 per cent in 2011-12 to 22.8 per cent in 2017-18 as per the latest records on employment data which points towards a formalization of the economy. The CPI inflation for the first half of the fiscal year was marked at 3.3%, slightly higher than the same in the second half of the previous year. At the same time, the Wholesale Price Index (WPI) inflation declined sharply from 3.2 per cent in April 2019 to 2.6 per cent in December 2019, reflecting the weakening of demand pressure in the economy. The growth in the agricultural sector showed a modest revival in the first half of FY 2019-2020.
The survey also noted that India ranks third in the number of new firms created, as per the World Bank. A12.2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014, shows a sharp increase in the creation of new firms since the Modi government came to power. This was significantly higher in services than in any other sector.
The survey also suggests a strategy similar to the one used by China in order to capitalize on the creation of jobs and growth. It says that By integrating “Assemble in India for the world” into Make in India, India can raise its export market share to about 3.5 % by 2025 and 6 % by 2030 and create 4 crore well-paid jobs by 2025 and 8 crores by 2030. The survey recommends a “Specialization at large scale in labour-intensive sectors, especially network products” combined with a “Laser-like focus on enabling assembling operations at mammoth scale in network products”.
The Survey noted that India gained a trade surplus of 0.7 % per year for manufactured products and 2.3 % per year for total merchandise. It was also observed that India trails in areas such as Ease of Starting Business, Registering Property, Paying Taxes and Enforcing Contracts. For further progress in the area of Ease of Doing Business, the survey recommended “Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.” It also recommended a more targeted approach towards individual sectors such as Tourism and Manufacturing.
The government’s decision to divest 53.29% of its shares in BPCL increased the national wealth by around Rs. 33,000 crore, the survey noted. It recommended aggressive disinvestment in Central Public Sector Enterprises (CPSEs) in order to bring in higher profitability, increase efficiency and competitiveness, and promote professionalism.