LIVE: India took 'short-term pain' for long-term economic gain, says CEA

BUDGET SESSION 2021 LIVE UPDATES: Finance Minister Nirmala Sitharaman tabled Economic Survey today. Stay tuned for LIVE updates on Budget session of the Parliament

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CEA Krishnamurthy Subramanian

CEA Krishnamurthy Subramanian

BUDGET SESSION 2021 LIVE UPDATES: Union Finance Minister Nirmala Sitharaman tabled the Economic Survey 2020-21 in the Parliament, which provides a summary of the annual economic development across the country during the financial year.

India’s economy could contract 7.7 per cent in the financial year that ends on March 31, pulled down mainly by the coronavirus pandemic and the weeks-long nationwide lockdown to contain the disease. Real GDP growth could be 11 per cent in the next financial year, the survey said.

But the government predicts the rollout of vaccines against Covid-19 will re-energise Asia's third-largest economy with 11 per cent growth next year, putting it on track to post the strongest growth since India liberalised its economy in 1991.

Earlier, President Ram Nath Kovind strongly defended the three contentious agri laws that have sparked intense protests from a section of farmers, and slammed as "'very unfortunate" the violence during the farmers' tractor parade on Republic Day.

He also noted that the new agri laws have immediately benefited 10 crore small farmers.

In his customary address to the joining sitting of Parliament on the first day of the Budget session, Kovind said the "insult" to the tricolour and Republic Day during the January 26 protests was "very unfortunate".

The most important items on the agenda in the session are the passage of the Budget and related documents — the Economic Survey for 2021-22 on Friday, The Union Budget on Monday, and the report of the Finance Commission.

Stay tuned for Budget session 2021 LIVE updates.
2:31 AM

Increasing health spend to 3% can halve out-of-pocket expenses: Eco Survey

Health care is finally taking centre stage owing to the Covid-19 pandemic, the Economic Survey said, while calling for increased spending to prepare for the next health crisis, which could be drastically different from Covid-19. It also batted for setting up a sectoral regulator.
The survey estimated that an increase in health spend from 1 per cent to 2.5-3 per cent of gross domestic product (GDP) can decrease the out-of-pocket expenditure from 65 per cent to 30 per cent of the overall health care spend.
“From a financial perspective, India has one of the highest levels of out-of-pocket expenditures in the world, contributing directly to the high incidence of catastrophic expenditures and poverty.”
Stressing that India must take steps to improve health care accessibility and affordability, it said, “Covid-19 has showcased how a health care crisis can get transformed into an economic and social crisis.”
The survey said the focus must be on building the health care system generally rather than a specific focus on communicable diseases. Read more

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2:31 AM

No 'jugaad': Businesses must raise R&D spend, says Economic Survey

Ramping up investment in research and development (R&D) will be key for India to become the third largest economy, and increased investment from the private sector will be vital for this, the Economic Survey said.
“Mere reliance on ‘jugaad innovation’ risks missing the crucial opportunity to innovate our way into the future. This requires a major thrust on R&D by the business sector. India’s resident firms must increase their share in total patents to a level commensurate to our status as the fifth largest economy in current US dollars. India must also focus on strengthening institutions and business sophistication to improve its performance on innovation outputs,” the Survey noted.
Though India was ranked 48th among 131 innovating countries in the Global Innovation Index (GII) 2020, a huge leap from 81st in 2015, the Survey noted that the government does the heavy lifting on R&D and there is a need for businesses to contribute more to the sector.
India’s gross expenditure on R&D is 0.65 per cent of its gross domestic product (GDP), significantly lower than the 1.5-3 per cent of GDP spent by the top 10 economies. It remains low despite the Centre’s higher contribution to GERD (gross domestic expenditure on R&D). Read more
2:29 AM

Sowing trust: Agri reforms a remedy, not a malady, says Economic Survey

On a day when thousands of farmers once again started gathering on Delhi borders in protest against the three farm laws, the Centre, both through the Economic Survey and the Presidential address, came out strongly in support of the laws. It said these changes will herald a new era of market freedom which can go a long way in improving the lives of small and marginal farmers in India.
The Survey said the three farm laws are a "remedy not a malady", designed primarily for the benefit of small and marginal farmers, who are the biggest sufferers of the “regressive” APMC-regulated market regime.
On food management, the Survey advocated increasing the central issue price (CIP) of grains sold through the ration shops to tame burgeoning food subsidy burden. Read more

2:28 AM

RBI must use reserves for domestic investment, says Economic Survey

The Economic Survey once again suggested the Reserve Bank of India (RBI) use its reserves for domestic purposes rather than keeping them unutilised and invested in low-yielding assets abroad.
“A developing country like India needs to spend on domestic investments to spur growth. The surplus, therefore, gives adequate space for increased expenditure on investments in 2021-22,” the Survey said.
The Economic Survey had, in the past, debated the RBI’s adequacy of reserves and suggested the excess be spent on infrastructure, or be spent to recapitalise banks.
As on January 22, the RBI’s foreign exchange reserves stood at $585.33 billion, up from $466.7 billion a year ago. Sustained accretion to foreign exchange reserves has improved India’s import cover to 18.4 months, and the reserves cover 236 per cent of the short-term debt in terms of residual maturity. Read more
9:34 PM

School students owning smartphone in rural India up 61% in 2 yrs: Survey

The percentage of school students owning a smartphone in rural India has increased from over 36 per cent to 61 per cent in the last two years, the Economic Survey 2020-21 noted and stated that if utilised well, the resultant reduction in digital divide is likely to reduce inequalities in educational outcomes.
According to the survey tabled in Parliament on Friday, "Access to data network, electronic devices such as computer, laptop, smartphone, etc. gained importance due to distance learning and remote working.... Percentage of enrolled children from government and private schools owning a smartphone increased enormously from 36.5 pc in 2018 to 61.8 pc in 2020 in rural India." "Utilised well, the resultant reduction in the digital divide between rural and urban, gender, age and income groups is likely to reduce inequalities in educational outcomes," it said.
After schools and other education institutions were closed in March 2020 due to the coronavirus pandemic, children are taught online using available assets at home.
On the literacy front, the survey pointed out how the country is still four per cent short of 100 per cent literacy at elementary level and female literacy continues to be below the national average.
9:33 PM

Indian economy to witness 'V-shaped' rebound with 11% growth next fiscal: Eco Survey

India's economy is likely to grow by 11 per cent in the fiscal year beginning April 1 as a vaccine drive and rebound in consumer demand help it emerge from the carnage inflicted by a strict coronavirus lockdown, the Economic Survey said on Friday.
The rebound will follow an estimated 7.7 per cent contraction in the Gross Domestic Product (GDP) in the current financial year ending March 31, the document -- an annual report card on the economy -- tabled in Parliament by Finance Minister Nirmala Sitharaman said.
This is the steepest annual contraction of the economy in the history of independent India. The economy had last witnessed its last annual contraction of 5.2 per cent in the fiscal year 1979-80.
The contraction in the current 2020-21 fiscal (April 2020 to March 2021) compares with a revised growth rate of 4 per cent in the previous year.
The rollout of vaccines against Covid-19, which has killed nearly 1.54 lakh in the country, will re-energise the world's fifth-largest economy with a growth rate that is strongest since the 1991 economic liberalisation.
The "V-shaped recovery is supported by Covid vaccination drive," the survey said.
Chief Economic Adviser Krishnamurthy Venkata Subramanian, who led the team which authored the pre-budget document, said India's strict lockdown prevented 37 lakh cases and one lakh deaths.
"The country took short term pain for long term gain. While GDP growth will recover, and it has, lost human lives cannot be brought back," he said at a post-presentation press conference.
9:32 PM

India needs to focus on growth to alleviate poverty: Eco Survey

Economic growth has a far greater impact on poverty alleviation than inequality and India needs to focus on growth to lift poor out of poverty, the Economic Survey for 2020-21 said on Friday.
The Survey said that unlike in advanced economies, in India, economic growth and inequality converge in terms of their effects on socio-economic indicators.
"Economic growth has a far greater impact on poverty alleviation than inequality... Given India's stage of development, India must continue to focus on economic growth to lift the poor out of poverty by expanding the overall pie" it said.
The survey noted that redistribution is only feasible in a developing economy if the size of the economic pie grows.
It also pointed out that China has made exceptional strides in reducing its extreme poverty rates since 1970s.
As per data from China National Bureau of Statistics, the head count ratio of poverty has reduced by 94 per cent from 1980 to 2015 in rural China.
The Economic Survey 2019-20 had also argued that ethical wealth creation -- by combining the invisible hand of markets with the hand of trust -- provides the way forward for India to develop economically.
9:32 PM

Economic Survey for simplification of regulations

The Economic Survey on Friday called for simplification of regulatory processes in the light of uncertainties in the real world scenarios.
The Survey noted that administrative processes in India are often loaded with significant amount of procedural delays and other regulatory complexities in decision-making process, making them inefficient and cumbersome for all stakeholders.
It has highlighted this problem and recommended ways and means to resolve this administrative challenge.
The Economic Survey 2020-21 presented in Parliament on Friday said that in order to solve the problems, authorities often make attempts to reduce discretion by having evermore complex regulations, which is counterproductive and results in even more non-transparent discretion.
International comparisons show that the problems of India's administrative processes derive less from lack of compliance with process or regulatory standards, but more from over-regulation, it said.
It is not possible to have regulations that can account for all the uncertainties in the world and all possible outcomes, it said, adding, the evidence shows that India over-regulates the economy. This results in regulations being ineffective even with relatively good compliance with process.
Using the framework of 'incomplete contracts', the Survey argued that the problem of overregulation and opacity in Indian administrative processes flows from the emphasis on having complete regulations that account for every possible outcome.
This is due to the inadequate appreciation of the difference between ‘Regulation' and ‘Supervision', on the one hand, and the inevitability of incomplete regulations, on the other hand, it said.
8:44 PM

Economic Survey 2020-21 prioritises growth over fiscal consolidation

Three important releases on 29 January 2021 provide critical clues to both policy direction and the likely magnitude of the fiscal aggregates in the forthcoming budget for 2021-22. The first of these releases, that is, the Economic Survey for 2020-21, provides crucial signals relating to the likely fiscal policy stance of the budget for the forthcoming year as well as for the medium-term.

The second release, by the CGA, provides updated information regarding centre’s fiscal aggregates up to December 2020. These numbers portray a relatively sharp improvement in central government’s gross and net tax revenues. The third release pertains to the NSO’s first revised estimates for GDP and GVA for 2019-20. These would have implications for the base numbers for the union budget’s fiscal aggregates. Bringing together this set of important and updated information, it may be feasible to formulate an idea about critical budget magnitudes as well as its thrust and prioritization. READ ON...
7:51 PM

Stronger vaccination drive need to revive economy, create jobs: Nandan Nilekani

The acceleration of the vaccination efforts against Covid-19 at scale would help India to come out of the pandemic crisis faster and sooner revive the economy and create jobs, said Nandan Nilekani, founding architect of Aadhaar and co-founder of Infosys.
He said this would require strong cooperation between the government and the private sector and it is a too big task for one person and organisation to accomplish.
“If you have to vaccinate at scale, we would have to vaccinate 5-10 million people per day, to make it happen,” said Nilekani at an event organised by Public Affairs Forum of India (PAFI). READ ON...

Nandan Nilekani
7:39 PM

Eco Survey suggests end to forbearance, another asset quality review round

The Economic Survey report suggested that there should be one more round of asset quality review (AQR) of banks after the Covid-related forbearance is over, even as it severely criticised the Reserve Bank of India (RBI) for not being able to unearth the full extent of bad debt mess in banks in the previous round of such an exercise.
The survey said the present round of forbearance measures should not be dragged on for long, but should be "discontinued at the first opportunity when the economy exhibits recovery,” adding, it is like an emergency medicine that can have lasting side-effects and lead to deeper crisis if continued for long.
The policymakers should lay out thresholds of economic recovery at which such measures should be withdrawn. These thresholds should be communicated to the banks in advance so that they can prepare for the same. "As well, forbearance should be accompanied by restrictions on zombie lending to ensure a healthy borrowing culture,” the survey report said. READ ON...
7:06 PM

Economic survey projects India's GDP growth at 11% for fiscal 2022

India forecast robust economic growth of 11% for the fiscal year beginning on April 1 in its annual economic survey on Friday, on the back of the beginning of a nationwide coronavirus vaccination drive and a rebound in consumer demand.
The Indian economy, which the International Monetary Fund singled out as a global bright spot only a few years ago, is set to contract 7.7% in this fiscal year, to March 31, the deepest contraction in four decades, the government said in the survey.
But the government predicts the rollout of vaccines against COVID-19, which has killed 153,847 Indians, will re-energise Asia's third-largest economy with 11% growth next year, putting it on track to post the strongest growth since India liberalised its economy in 1991. READ ON...

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6:47 PM

India's Covid-19 response saved over 100,000 lives: Economic Survey

India's pandemic response, focused on saving lives and livelihoods, restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives, as per the Economic Survey 2020-21.
The pre-Budget document tabled in Parliament on Friday noted that in the absence of a potent cure, preventive vaccine; interplay of network structures in densely populated areas, and a high case fatality rate (CFR), India weighed the costs and opportunities strategically.
The limits of scientific understanding of the disease, lack of good data on the mode of spread and potency of the virus made it difficult to model the likely impact of different policy options in a reliable and timely way. To aggravate the uncertainty, it was estimated that India would have 30 crore cases and several thousand deaths by the end of May, 2020, it noted. India imposed a strict lockdown from March 25 to May 31, 2020 to check the spread of the virus.
6:02 PM

Economic Survey pegs India's real economic growth in 2021-22 at 11%

India’s economy could contract 7.7 per cent in the financial year that ends on March 31, pulled down mainly by the coronavirus pandemic and the weeks-long nationwide lockdown to contain the disease, Chief Economic Advisor Krishnamurthy Subramanian has estimated in the Economic Survey 2020-21, tabled in Parliament on Friday. Real GDP growth could be 11 per cent in the next financial year, the survey said.

"Agriculture has remained the silver lining, while contact-based services, manufacturing and construction sectors were the worst hit by the COVID-19 pandemic,” said the survey. It predicted a V-shaped economic recovery spurred by India's Covid-19 vaccination programme. READ MORE...

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5:35 PM

Investment in infra essential to growth boost, says Economic Survey 2020-21

Terming investment in infrastructure "quintessential" to boost growth, the Economic Survey on Friday said post unlocking of the economy, infra sectors are poised for growth and construction of roads is expected to return to the high pace attained before COVID-19.
The infrastructure sector will be the key to overall economic growth and macroeconomic stability, the Survey said emphasising that the year after the crisis (2021-22) will require sustained and calibrated measures to facilitate the process of economic recovery and enable the economy to get back on its long-term growth trajectory.
"Basic infrastructure facilities in the country provide the foundation of growth. In the absence of adequate infrastructure, the economy operates at a suboptimal level and remains distant from its potential and frontier growth trajectory. READ ON...
5:17 PM

Economic Survey 2020-21 endorses continuation of expansionary fiscal stance

The pre-Budget Economic Survey for 2020-21 has wholeheartedly endorsed the continuation of an expansionary fiscal stance for the next financial year. Tabled in Parliament just three days before Finance Minister Nirmala Sitharaman would present the Union Budget for 2021-22, the Survey has stated that the government may have to continue with an expansionary fiscal stance “in order to sustain the recovery in aggregate demand.”
The Survey, presented in two volumes along with a statistical appendix, is also quite bullish about medium-term growth prospects, largely due to the expenditure support and various reforms introduced during the current year. READ MORE...
5:13 PM

Enhanced govt spending on healthcare to cut out-of-pocket spending: Economic Survey

An increase in government spending on the healthcare sector - from the current 1 per cent to 2.5-3 per cent of GDP - as envisaged in the National Health Policy 2017 could reduce out-of-pocket expenditures, as per the Economic Survey 2020-21. The rise in public spending can lead to a reduction in expenditures from 65 per cent to 30 per cent of overall healthcare spend, PTI reported.
The Economic Survey said that for the country to effectively respond to future pandemics, the country's health infrastructure needs to be agile. Given its potential to provide healthcare access in remote areas, telemedicine needs to be harnessed to the fullest by especially investing in internet connectivity and health infrastructure, it added.
The annual document also noted that focus on the National Health Mission (NHM), which has played a critical role in mitigating inequity as the access of the poorest to pre-natal and post-natal care, should continue in conjunction with Ayushman Bharat.
4:59 PM

India needs to focus on growth to lift poor out of poverty: Economic Survey

Economic growth has greater impact on poverty alleviation than inequality; India needs to focus on growth to lift poor out of poverty: Economic Survey
4:55 PM

New farm laws herald new era of market freedom: Economic Survey

The government's annual Economic Survey on Friday strongly defended new farm laws, saying they herald a new era of market freedom which can go a long way in improving lives of small and marginal farmers in India, news agency PTI reported. These legislations were designed "primarily" for the benefit of "small and marginal farmers", which constitute around 85 per cent of the total number of farmers and are the biggest sufferer of the "regressive" APMC-regulated market regime, the survey said.
The pre-budget document defended the farm laws in the backdrop of long-running farmers' agitation at various borders of the national capital seeking repeal of these legislations expressing concern that they are pro-corporate and could weaken government regulated mandis, also called Agriculture Produce Marketing Committees (APMCs).
"Several Economic Surveys have expressed concern at functioning of the APMCs and the fact that they sponsor monopolies. Specifically, Economic Surveys for the years 2011-12, 2012-13, 2013-14, 2014-15, 2016-17, 2019-20 focused on the reforms required in this context," the survey said.
4:48 PM

Economic Survey LIVE: India will be hailed for its mature and bold response, says CEA

When the history judges India for its response to this once-in-a-century health crisis, it will be hailed for its mature and bold response, said Chief Economic Advisor Dr K V Subramanian.

First Published: Jan 29 2021 | 08:04 AM IST

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