India will grow 8-8.5 per cent in 2022-23, the Economic Survey said in a guarded prognosis on January 31, with the economy poised to dash onto a faster lane, decisively leaving behind the coronavirus-inflicted devastation.
It, however, cautioned about rising oil prices, surging inflation, creeping interest rates in the US whose ripples could be felt in India, and identified employment, education and agriculture as the three key focus areas in the medium term.
“This projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of $70-$75 per barrel, and global supply chain disruptions will steadily ease over the course of the year,” the annual Economic Survey 2021-22 tabled in Parliament on Monday, said.
The Indian economy will grow at 9.2 percent in the current year (2021-22), according to the National Statistical Office’s (NSO) growth projections released at the beginning of the month.
The International Monetary Fund (IMF) has projected that India's real gross domestic product (GDP) will grow 9 per cent in 2022 and 2023 followed by 7.1 per cent growth in 2024.
The forecast for 2021-22 is nearly two percentage points lower than the 11 per cent growth the Survey had forecast last year. The two Covid-19 waves—the Delta-variant in April-May last year and the ongoing Omicron-variant infections—and the resultant disruptions may have caused the lower-than-anticipated growth.
The Survey, the first authored by Principal Economic Adviser Sanjeev Sanyal and his team at the finance ministry in the absence of a full-time chief economic adviser (CEA), sounded a note of caution on the potential of the US Fed Reserve’s tapering of the quantitative easing (QE) policy, and India, despite being adequately fortified, needs to keep an eye out on the potential impact.
“The long-awaited taper process has commenced by the systemically important central banks, renewing thereby an element of interest - within the academia and policy circles - in the potentially destabilising spill-over impact on the emerging market and developing economies as also for India,” it said.
The Survey’s no-holds-barred account made a strong case to quickly launch a fresh round of bold policy and legislative reforms including easing rules of India’s Insolvency and Bankruptcy Code (IBC), and, most importantly, take a fresh look at agricultural reforms to remove rigidities that will fetch better prices to farmers’ produce.
On IBC, the Survey was pointed in its observations that it needs to be relooked to make processes smoother and less time consuming.
“The first key issue in the process is delays in obtaining No Objection Certificates (NOCs) from departments including Central Board of Direct Taxes, Central Board of Indirect Taxes and Custom, Employee Provident Fund Organisation and other sectoral regulators. The NOCs are implied to be taken although not specifically mentioned in the Code.This leads to confusion regarding the procedures to be followed”, it said.
Another issue in the process is that there are no well-defined Standard Operating Procedures (SoPs). Apart from simplifying the issues in the various steps in the processes, there is a need for the creation of a single window for the entire process. A portal that combines all the steps of the liquidation process altogether, starting from application by companies to processing by all departments will prove to be very useful, it said.
The survey favoured a fresh plan to deal with India’s chronic agrarian distress, including use of big data, artificial intelligence (AI), drones, and incentives for startups to enable farmers to get swifter and accurate information about weather, prices and other aspects.
“There is a need to explore options and promote use of alternative fertilizers such as Nano Urea and organic fertiliser which protect the soil, are more productive and contribute to higher nutrient use efficiency. Focus should be on use of new technology including drones and AI-based decision support systems, reduction in use of chemical fertilizers and use of low-cost organic inputs and supporting start-ups for innovations”, it said.
It also called for enhancing infrastructure for perishables, and policies to goad farmers to move away from rice and wheat to other commodities.
“Encouraging farmers to shift from cultivation of rice and wheat to pulses and oilseeds would help ensure that the country is self-reliant in pulses and oilseeds and also assist in reducing import dependence,” it said.
The Survey also called for better storage and supply chain management to ensure availability in lean season and reduced wastages of horticulture and other perishable essential commodities to address the seasonal spikes in prices for consumers, glut for the farmers in times of good harvests due to lack of marketing infrastructure, resulting in distress sales.
“Effective utilisation of the Agriculture Infrastructure Fund for investment in viable projects for post-harvest management infrastructure for perishable commodities can help improve agriculture infrastructure in the country. Schemes like Operation Green and Kisan Rail need to be exploited further to protect the interests of the farmers as well as the consumers,” it said.The annual Economic Survey, presented a day before the presentation of the annual budget on February 1, as the official report of the economy.
This year, the Survey has returned as a single volume divided in two parts — commentary and statistical tables.
Last week, the government had appointed Venkatraman Anantha Nageswaran as the new CEA, replacing Krishnamurthy Subramanian, who had returned to academia in December 2021 after his three-year tenure as CEA ended.
Successive CEAs have used the Economic Survey to recommend policy changes, sometimes even sweeping measures.
The government isn’t bound to follow these recommendations and only serve as a policy guide. The Economic Survey, in the past, has favoured policy moves that come into conflict with the official line of thinking of the government in power.
These do not necessarily serve as pointers to what to expect in the annual budget. On many occasions, policy changes recommended in the Economic Survey have not been reflected in budget proposals.Economic Survey 2022: WPI continues to surge, India needs to be wary of imported inflation