Insights into Editorial: Economic Survey projects 8%-8.5% growth in 2022-23

Context:

The Economic Survey for 2021-22, tabled by Finance Minister in the Lok Sabha, expects the GDP to grow by 9.2% this year and 8% to 8.5% in 2022-23, even as it expressed concerns about the implications of hardening inflation and energy prices.

Growth in 2022-23 will be supported by 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.

The year ahead is also well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of the economy.

About Economic Survey document:

In India, the Economic Survey prepares the background framework for the Union Budget.

It facilitates a bird’s eye view of the trends noticed in different sectors over the previous year like agriculture, manufacturing, employment, infrastructure, prices, exports, imports, foreign exchange reserve, and money supply for example.

The various objectives of the Economic Survey in India can be summed up under three heads:

1. Reviewing the country’s economic development over the past 12 months.
2. Summarizing how the different development projects of the country perform.
3. Highlighting the government’s policy initiatives.

Economic Survey for 2021-22:

1. The central theme of this year’s Economic Survey is the “Agile approach”.
2. This year’s survey uses various examples to highlight the use of satellite and geospatial data to reflect the infrastructural growth in the country.
3. GDP growth Projection comparable with World Bank and Asian Development Bank’s latest forecasts of real GDP growth of 8.7% and 7.5% respectively for 2022-23.
4. According to the International Monetary Fund’s latest World Economic Outlook projections, India’s real GDP is projected to grow at 9% in 2021-22 and 2022-23 and at 7.1% in 2023-2024, which would make India the fastest growing major economy in the world for all 3 years.
5. Combination of high Foreign Exchange Reserves, sustained Foreign Direct Investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.
6. It highlighted that the country’s macro-economic stability indicators on the external front, fiscal front as well as the financial sector health and inflation, were well-placed to take on the challenges of 2022-23.
7. ‘One of the reasons’ for this comfortable position, the Survey argued, was the government’s unique response strategy that didn’t ‘pre-commit to a rigid response’ but ‘opted to use safety nets for vulnerable sections’ based on information.

Investment recovery:

The country’s investment to GDP ratio had hit 29.6% in 2021-22, the highest level in seven years, the Survey explained, attributing this capital formation to the government’s policy thrust on quickening the ‘virtuous cycle of growth via capex and infrastructure spending’ had increased capital formation in the economy.

While private investment recovery is still at a nascent stage, there are many signals which indicate that India is poised for stronger investment, citing record corporate profits in recent quarters and high mobilisation of risk capital by firms.

Employment Indicators:

1. With revival of the economy, employment indicators bounced back to pre-pandemic levels during the last quarter of 2020-21.
2. As per the quarterly Periodic Labour Force Survey (PFLS) data up to March 2021, employment in urban sector affected by pandemic has recovered almost to the pre-pandemic level.
3. According to Employees Provident Fund Organisation (EPFO) data, formalisation of jobs continued during the second Covid wave; adverse impact of Covid on formalisation of jobs much lower than during the first Covid wave.

Inflation, Current account worries:

1. Inflation has reappeared as a global issue in both advanced and emerging economies.
2. India does need to be wary of imported inflation, especially from elevated global energy prices,” it stated, even as it suggested that the double-digit wholesale price inflation in recent months would ‘even out’.
3. However, an equally strong recovery was seen in imports, rendering India’s net exports negative for the first half of the year, from a surplus in 2020-21.
4. India has thus recorded a modest current account deficit of 0.2% in the first half, but robust capital flows in the form of continued inflow of foreign investment were sufficient to finance it, it pointed out.
5. Elevated global commodity prices, revival in real economic activity driving higher domestic demand and growing uncertainty surrounding capital inflows may widen current account deficit further during the second half of the year. However, it is expected to be within manageable limits.
6. Taking on criticism that the ‘Atmanirbhar Bharat approach’ marks ‘a return to old school protectionism’, the Survey concluded that “the focus on economic resilience is a pragmatic recognition of the vagaries of international supply chains’.

Sustainable Development and Climate Change:

1. India’s overall score on the NITI Aayog SDG India Index and Dashboard improved to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19.
2. India has the tenth largest forest area in the world. In 2020, India ranked third globally in increasing its forest area during 2010 to 2020.
3. In 2020, the forests covered 24% of India’s total geographical, accounting for 2% of the world’s total forest area.
4. In August 2021, the Plastic Waste Management Amendment Rules, 2021, was notified which is aimed at phasing out single use plastic by 2022.
5. The Compliance status of Grossly Polluting Industries (GPIs) located in the Ganga main stem and its tributaries improved from 39% in 2017 to 81% in 2020.
6. The consequent reduction in effluent discharge has been from 349.13 millions of litres per day (MLD) in 2017 to 280.20 MLD in 2020.
7. The Prime Minister, as a part of the national statement delivered at the 26^th Conference of Parties (COP 26) in Glasgow in November 2021, announced ambitious targets to be achieved by 2030 to enable further reduction in emissions.
8. The need to start the one-word movement ‘LIFE’ (Lifestyle for Environment) urging mindful and deliberate utilization instead of mindless and destructive consumption was underlined.

Conclusion:

Initial measures of lockdown, social distancing, travel advisories, practicing hand wash, wearing masks reduced the spread of the disease.

Country also acquired self-reliance in essential medicines, hand sanitizers, protective equipment including masks, PPE Kits, ventilators, COVID-19 testing and treatment facilities.

World’s largest COVID-19 vaccination drive commenced on 16th January, 2021 using two indigenously manufactured vaccines.

The progress of vaccination should be seen not just as a health response indicator, but also as a buffer against economic disruptions caused by repeated pandemic waves.