The Economic Survey 2019 has predicted a 7% growth by the end of the current fiscal; it has, however, contended that it won’t be enough for India to become a $5-trillion economy in five years. The country needs an 8% growth to double its economy, the document pointed out.
The Survey also stressed that continuous growth is not possible without an ecosystem that supports innovation and practises healthy habits like saving. “As the economy started doing better, China started saving and investing more; India needs to learn from this and adopt a virtuous cycle,” Chief Economic Advisor K Subramanian said at the launch.
“Investment as a percentage of GDP has to be more than 30%. We need to invest at close to 35% going forward, to sustain the virtuous cycle triggered by investment,” he added.
The Economic Survey 2019 has laid out a blueprint for growth and jobs for the next five years, based on initiatives by the NDA government.
Hailing the government’s Swachh Bharat Abhiyaan and the Beti Bachao Beti Padhao campaign, the Survey charted the future course for the two flagship schemes. It also highlighted the need for a robust infrastructure to create a $10-trillion economy by 2032.
For homegrown start-ups
With the Survey 2019 released Thursday, on the eve of the Union Budget, the government advocated for further collection and utilisaton of citizens’ data; it also laid down recommendations so that start-ups can find a firm and certain footing in the sluggish economic landscape like brick and mortar firms.
It took a clear stance against tax evaders and laid down the plan to crack down on foreign-funded e-commerce firms.
“Firms that grow large overtime are significant contributors to employment and value. We need more focus on these firms to reap economies of scale,” the CEA said.
In a whole chapter devoted to data, the Survey mentioned that “the private sector may be granted access to select databases for commercial use. Consistent with the notion of data as a public good, there is no reason to preclude commercial use of this data for profit”.
Government wants to monetise citizens’ data
There is sufficient cause for concern with the Survey’s proposals around data collection by the State. But some of the more benign recommendations include setting up a National Scholarship Portal and a separate Health Registry that would be accessible by professionals using citizens’ unique Aadhaar ID.
The idea is for the government to invest in collection, storage, and analysis of data that will help it in framing “evidence-based policy” to ensure “ease of living” for its citizens, initiate better-targeted welfare schemes, and bring “greater accountability in public schemes” which, in turn, would result in better governance.
Changing demographic dividend
Increase in life expectancy may see the retirement age being pushed up to 70, the Economic Survey noted.
“Since an increase in the retirement age is perhaps inevitable, it may be worthwhile signalling this change well in advance—perhaps a decade before the anticipated shift—so that the workforce can be prepared for it,” the Economic Survey for 2018-2019, tabled in Parliament by Finance Minister Nirmala Sitharaman Thursday, said.
At the press conference, Subramanian said, “In the next two decades, we will be able to avail the benefits of demographic change, which will allow us to grow in a sustained manner at 8%.”
Deregulating legal reforms for businesses
The Economic Survey 2019 observed that deregulating labour law restrictions can create significantly more jobs, making relevant suggestions based on the model in Rajasthan.
Regarding the minimum wage rules, the survey said, currently, it doesn’t cover one in every three workers. “Minimum wages should cover all workers, irrespective of any wage ceiling… it should be fixed for four categories—unskilled, semi-skilled, skilled, and highly skilled,” the survey said.
Pay your dues and invest
The Survey emphasises fiscal consolidation and fiscal discipline, hailing private investments as the key driver of growth, demand, capacity, labour productivity, new technology, creative destruction, and job creation.
Speaking on shirking taxes, CEA Subramanian quoted from Upanishads to John Maynard Keynes to appeal to the conscience of tax dodgers, arguing that the repayment of debt in one’s own life is prescribed as necessary by scriptures across religions.
The roadmap to the $5-trillion economy has been inspired by “Gandhiji’s talisman—think about the poorest person, the common man”, he said.
Making a case for EVs
The Survey noted that good charging infrastructure will effectively lead to mass adoption of electric vehicles, rather than incentives to switch or purchase EVs. That is because the driving range of batteries in an electric vehicle is lower, compared to those that run on fossil fuel.
Bring capex back on track
Taking note of the recent successes in recovery of loans since the Insolvency and Bankruptcy Code came into effect, the Survey has proposed further strengthening of the National Company Law Tribunals and the appellate tribunal.
It adds that till March 31, 2019, the Corporate Insolvency Resolution Process yielded a resolution of 94 cases, which resulted in settlement of claims worth Rs 1.73 lakh crore.
The improvement in the asset quality of banks over the last financial year is expected to help bring the capex cycle back on track, but concerns remain on sluggish credit growth.
“There are signs of continuing resolution of stressed assets in the banking sector, as reflected in the decline in NPA to gross advances ratio as on December 2018, which should push the capex cycle,” noted the Economic Survey 2019.
The Budget is expected to alleviate some of the concerns in the banking and non-banking sectors by increasing capital infusion and laying down measures to revive NBFCs’ lending capacity.
According to the Economic Survey, in the coming months, India will face numerous fiscal challenges following the economic slowdown that’s expected to impact tax collections amid rising state expenditure in the agricultural sector.
Other challenges include oil prices after Iran sanctions, below-target revenue from the Goods and Services Tax, sourcing funds for big schemes, farmer’s income, and healthcare.
The Survey has also flagged fiscal devolution and federalism, expenditure reform, advocating policy certainty for micro, small, and medium enterprises.
Overall, the Survey reported that combined liabilities of Centre and the states have dipped to 67% of the GDP as on March-end 2018, from 68.5% of the GDP as on March-end 2016.
“We have grown well. But we need to shift gears,” the CEA said in conclusion.
Prarthana Mitra is a Staff Writer at Qrius.