A quick revival in India's economic growth nearly two years into the Covid pandemic has boosted growth expectations even in an uncertain climate, Principal Economic Advisor Sanjeev Sanyal said on January 31. He added that most sectors were reaching pre-pandemic levels.
Addressing the press after the latest Economic Survey was tabled in Parliament earlier today, Sanyal said growth expectations in the coming year is based on higher government spending, focus on fiscal stability, and a high forex reserve.
While the newly appointed Chief Economic Advisor (CEA) V Anantha Nageswaran began his tenure on January 28, the latest survey has been created by Sanyal and team.
Nageswaran said the overall theme of the economic survey has been on providing short-term support to vulnerable sections, during these uncertain times while keeping a firm focus on the medium-term fiscal stability and never letting go of the opportunity that a crisis provides to initiate structural supply-side reforms.
The survey announced that India's GDP growth in 2022-23 is projected to grow between 8-8.5 percent. However, this is based on the assumption that 'there will be no more debilitating pandemic related economic disruption, a normal monsoon, significant withdrawal of global liquidity, average global oil prices in the range of $70-75, and global supply chain disruptions easing over time'.
Heading towards stable growth
Quoting a wide array of macro figures, Sanyal sought to calm the public's nerves over apprehensions regarding next year's growth. "The Indian economy is expected to grow by 9.2 percent in 2021-22 after contracting 7.3 percent in 2020-21. The Industrial sector is now 4.1 percent above pandemic levels. India's overall GVA grew by 8.6 percent year-on-year in 2021-22, after contracting 6.2 percent in 2020-21. Agriculture sector GVA is now 7.7 percent above pre-pandemic levels," Sanyal said.
However, he conceded that the services sector GVA still remained 8.5 percent below pre-pandemic levels.
Sanyal stressed that India's GDP is now 1.3 percent above pre-pandemic levels while Gross Fixed Capital Formation is 2.6 percent above pre-pandemic levels. The (Apr-Nov) period of 2021-22 had fiscal deficit at Rs 7 lakh crore, as against Rs 10.8 lakh crore in 2020-21 and Rs 8.1 lakh crore in 2019-20. Sanyal also said the sharp increase in both tax and non-tax revenue, which are now higher than pre-pandemic levels, has allowed the government to ramp up expenditure.
In fact, Nageswaran said that even capital expenditure by state governments has grown by 67 percent in 2021-22.
Sanyal also laid stress on the fact that India remains the only country for which IMF growth forecast has been increased, even as forecast for other countries were substantially reduced.
India now has $636 billion worth of forex reserves, one of the highest in the world, and equivalent to 13.2 months of imports. This would come in handy to buffer any tapering by the US Federal Reserve, according to Sanyal.
Sanyal also said India needs to be concerned about significant imported inflation particularly from energy prices. Nageswaran, however, stressed that the $70-75 per barrel of oil estimate made for the next financial year by the economic survey is an average price. "Thanks to the tightening of monetary policy globally and lowering of growth forecast in the developed world, the demand for oil will moderate," he said.
On the issue of Covid-19, Sanyal announced that 93 percent of India's adult population has received the first dose of COVID-19 vaccine as of Jan 16, while 69.8 percent has received the second dose.
India's spending on social services has risen to around Rs 20 lakh crore in 2021-22, while spending on education has risen to Rs 6.97 lakh crore and spending on health has risen to Rs 4.72 lakh crore. India's spending on other social services has risen to Rs 7.37 lakh crore. "Little short of Rs. 1 lakh crore worth of food has been distributed during Covid -19 pandemic," he said.
In the pan-India PM Awas yojana, of the 1.14 crore houses sanctioned in urban areas, 53 lakh houses have been completed, Sanyal said. The same is true for the 1.69 crore houses, out of 2.7 crore houses sanctioned in rural areas.
"As of 15th Aug 2019, in large parts of the country, not even 10 percent of the population had tap water connections. Now, states like Telangana, Bihar, much of the North East and Ladakh have performed the best.
Sanyal said that India granted 28,391 patents in 2020-21 out of the 58.502 patents applied in the same time while India's national highways have almost doubled since 2011.
Commenting on the unemployment crisis, Sanyal said there is a dearth of good official real-time unemployment data. However, it is known that there was a significant decline in employment during the lockdown and a significant revival till March, 2021, he said.
"EPFO data shows recovering job numbers for formal sector jobs, which are at the bottom of the pyramid. MNREGA data shows many source states for migrants like Bihar, are doing better in generating jobs, than many destination states for migrants, like Maharashtra and Punjab," he said.
Economic Survey upgraded
Sanyal also shed some light on the origin of the Survey itself. "The economic survey began as part of the Budget papers. The earliest survey I could find was from 1957. It was a short document, only 38 pages long," Sanyal said.
"The split of the document into 2 volumes in 2014. The first volume intended to have a thematic chapter, while the second had more traditional sectoral chapters. That has now been changed, with Volume 1 being the main text volume. The second volume will be a statistical appendix. Old tables have been removed while new kinds of data have been added. There's a section of High Frequency Indicators as well," he said.
Going beyond the traditional macro triggers, the Survey also sought to capture snapshots of the economy through new areas. This included data sets showing that resource mobilisation through IPOs during the Apr-Dec period of 2021-22 grew to Rs 104.8 thousand crore in India. While on the other hand, it mentioned that as many as 555 districts in India have at least 1 government-recognized startup.
Interestingly, the Survey pointed out that prices on the Government e-Marketplace portal were on average 9.5 percent lower when compared to e-marketplace platforms like Amazon and Flipkart, thereby leading to major savings in procurement.
Using geospatial data through satellites, the Survey also mapped the spread of commercial bank branches over the years, which has grown rapidly, but the number of branches has gone down due to mergers. It also showed that the Kharif crop cycle has shortened by two-three weeks in India, forcing farmers to burn their crops in parts of North India.
In his nearly 1-hour long presentation, Sanyal also sought to put his own imprint on the Survey. "Quarterly data shows manufacturing, construction, and other sector went through a phase of downturn - sharp downturn- revival - shallow downturn - flatten and then sustained revival. After a lot of discussions with the best minds, we felt this could be described as being a Tilted W curve," he said. Case in point, announcing new alphabet-based growth models has become a staple at Survey presentations over the past few years.
He said India should adopt a 'Barbell Approach' to address challenges presented by the economy, focussing on flexibility and innovation, as well as improving resilience.