Top 20 Key Highlights | Economic Survey 2020-21 | Download PDF

The Economic Survey of India is an Annual Document presented by the Government to review the state of the economy in the previous year (the financial year 2020-2021) while throwing light on its short-to-medium term prospects.

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The Economic Survey document is equally important as the main Union Budget as it not only lays the premise for key policy decisions that need to be taken to take the economy forward but also assesses the impact of the previous decisions through detailed statistical data.

Economic Survey is extremely important for upcoming exams like NABARD Grade A, RBI Grade B, SEBI, SBI PO etc. RBI Notification is already out, therefore we would suggest going through the summary of Economic Survey so that you do not lose out on any marks in the exam. Take up a free test for RBI Grade-B Here.

Economic Survey 2020-2021 Key Highlights

1. Factors Affecting India’s Road to a $5 trillion economy

The Survey posits that India’s aspiration to become a $5 trillion economy depends critically on:

  • Strengthening the invisible hand of the market.
  • Supporting it with the hand of trust.
  • Survey suggests that policies must empower transparency and effective enforcement using data and technology.

2. Entrepreneurship and Wealth Creation at the Grassroots

India ranks third in number of new firms created, as per the World Bank. With a 10 percent increase in registration of new firms in a district yields a 1.8 % increase in Gross Domestic District Product (GDDP). It was also observed that –

  • 12.2 % cumulative annual growth rate of new firms in the formal sector during 2014-18, compared to 3.8 % during 2006-2014.
  • About 1.24 lakh new firms created in 2018, an increase of about 80 % from about 70,000 in 2014.

3. Pro-business versus Pro-markets

Survey says that India’s aspiration of becoming a $5 trillion economy depends critically on:

  • Promoting ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth.
  • Weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.
  • Before liberalisation, a Sensex firm expected to stay in it for 60 years, which decreased to only 12 years after liberalisation.
  • Every five years, one-third of Sensex firms are churned out, reflecting the continuous influx of new firms, products and technologies into the economy.

4. Undermining Markets

Here are few of the undermining markets and the outcomes –

  • The regulation of prices of drugs, through the DPCO 2013, led to increase in the price of the regulated pharmaceutical drug vis-à-vis that of an unregulated but similar drug.
  • Emergence of Government as the largest procurer and hoarder of rice and wheat.
  • Burgeoning food subsidy burden
  • Inefficiencies in the markets, affecting the long run growth of agricultural sector.

5. Creating Jobs and Growth by Specializing in Network Products

By integrating “Assemble in India for the world” into Make in India, India can:

  • Raise its export market share to about 3.5 % by 2025 and 6 % by 2030.
  • Create 4 crore well-paid jobs by 2025 and 8 crore by 2030.
  • Exports of network products can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.

6. Impact of India’s trade agreements on overall trade balance

  • India’s exports increased by 13.4 % for manufactured products and 10.9 % for total merchandise
  • Imports increased by 12.7 % for manufactured products and 8.6 per cent for total merchandise.
  • India gained 0.7 % increase in trade surplus per year for manufactured products and 2.3 % per year for total merchandise.

7. Ease of Doing Business in India

India secured a jump of 79 positions to 63 in 2019 from 142 in 2014 in World Bank’s Doing Business rankings.

Suggestions for further Ease of Doing Business in the survey report:

  • Close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities.
  • Individual sectors such as tourism or manufacturing require a more targeted approach that maps out the regulatory and process bottlenecks for each segment.

8. Golden Jubilee of Bank Nationalisation: Taking stock

  • Survey observes 2019 as the golden jubilee year of bank nationalization
  • India has only one bank in the global top 100 – same as countries that are a fraction of its size: Finland (about 1/11th), Denmark (1/8th), etc.
  • The onus of supporting the economy falls on the PSBs accounting for 70 % of the market share in Indian banking.

9. Financial Fragility in the NBFC Sector

Survey investigates the key drivers of Rollover Risk of the shadow banking system in India in light of the current liquidity crunch in the sector. The survey computes a diagnostic (Health Score) by quantifying the Rollover risk for a sample of HFCs and Retail-NBFCs (which are representative of their respective sectors). The analysis of the Health Score has the following findings:

  • The HFC sector exhibited a declining trend post 2014 and overall health of the sector worsened considerably by the end of FY2019.
  • The Score of the Retail-NBFC sector was consistently below par for the period 2014 -19.
  • Larger Retail-NBFCs had higher Health Scores but among medium and small Retail- NBFCs, the medium size ones had a lower score for the entire period of 2014-19.

10. Privatization and Wealth Creation

  • Strategic disinvestment of Government’s shareholding of 53.29 per cent in HPCL led to an increase of around Rs. 33,000 crore in national wealth.
  • Survey presents an analysis of the before-after performance of 11 CPSEs which underwent strategic disinvestment from 1999-2000 to 2003-04.
  • Financial indicators such as net worth, net profit, return on assets (ROA), return on equity (ROE) etc of the privatized CPSEs, on an average, have improved significantly.
  • Privatized CPSEs have been able to generate more wealth from the same resources.

11. India’s GDP Growth

  • Models that incorrectly over-estimate GDP growth by 2.7 % for India post-2011 also misestimate GDP growth over the same period for 51 out of 95 countries in the sample.
  • Correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.

12. Thalinomics: The Economics of a Plate of Food in India

Post 2015-16:

  • Average household gained close to Rs. 11,000 on average per year from the moderation in prices in the case of vegetarian Thali.
  • Average household that consumes two non-vegetarian Thalis gained close to Rs. 12,000 on average per year during the same period.

From 2006-07 to 2019-20:

  • Affordability of vegetarian Thalis improved 29 %.
  • Affordability of non-vegetarian Thalis improved by 18 %.

13. India’s Economic Performance in 2019-20

  • India’s GDP growth moderated to 4.8 % in H1 of 2019-20, amidst a weak environment for global manufacturing, trade and demand.
  • Growth for ‘Agriculture and allied activities’ and ‘Public administration, defense, and other services’ in H1 of 2019-20 was higher than in H2 of 2018-19.
  • Current Account Deficit (CAD) narrowed to 1.5 % of GDP in H1 of 2019-20 from 2.1 % in 2018-19.
  • Sharper contraction of imports as compared to that of exports in H1 of 2019-20, with easing of crude prices.
  • Impressive Foreign Direct Investment (FDI).
  • Accretion of foreign exchange reserves.
  • Rebounding of portfolio flows.

Headline inflation expected to decline by year end: It increased from 3.3 % in H1 of 2019-20 to 7.35 % in December 2019-20 due to temporary increase in food inflation.

Survey expects an uptick in the GDP growth in H2 of 2019-20 @ 5% growth for 2019-20 based on CSO’s first Advance Estimates.

14. Fiscal Developments

  • Gross GST monthly collections have crossed the mark of Rs. 1 lakh crore for a total of five times during 2019-20 (up to December 2019).

15. External Sector

  • India’s BoP position improved from US$ 412.9 bn of forex reserves in end March, 2019 to US$ 433.7 bn in end September, 2019.
  • Foreign reserves stood at US$ 461.2 bn as on 10th January, 2020.
  • Current account deficit (CAD) narrowed from 2.1% in 2018-19 to 1.5% of GDP in H1 of 2019-20.

Top export items: Petroleum products, precious stones, drug formulations & biologicals, gold and other precious metals.

Largest export destinations in 2019-20 (April-November): United States of America (USA), followed by United Arab Emirates (UAE), China and Hong Kong.

Growth in Non-POL exports dropped significantly from 2009-14 to 2014-19.

Top import items: Crude petroleum, gold, petroleum products, coal, coke & briquittes.

India’s imports continue to be largest from China, followed by USA, UAE and Saudi Arabia.

16. Logistics industry of India

Logistics Industry is currently estimated to be around US$ 160 billion.

  • Expected to touch US$ 215 billion by 2020.
  • According to World Bank’s Logistics Performance Index, India ranks 44th in 2018 globally, up from 54th rank in 2014.

17. External Debt

It is expected to remain low at 20.1% of GDP as at end September, 2019.

18. Social Infrastructure, Employment and Human Development

  • The expenditure on social services (health, education and others) by the Centre and States as a proportion of GDP increased from 6.2 % in 2014-15 to 7.7 % in 2019-20 (BE).
  • India’s ranking in Human Development Index improved to 129 in 2018 from 130 in 2017:
  • Gross Enrolment Ratio at secondary, higher secondary and higher education level needs to be improved.
  • The share of regular wage/salaried employees has increased by 5 percentage points from 18 % in 2011-12 to 23 % in 2017-18.
  • A significant jump of around 2.62 crore new jobs with 1.21 crore in rural areas and 1.39 crore in urban areas in this category.
  • Total formal employment in the economy increased from 8 % in 2011-12 to 9.98 % in 2017-18.
  • Gender disparity in India’s labour market widened due to decline in female labour force participation especially in rural areas with around 60 % of productive age (15-59) group engaged in full time domestic duties.
  • Access to health services inter-alia through Ayushman Bharat and Mission Indradhanush across the country has improved.
  • Mission Indradhanush has vaccinated 3.39 crore children and 87.18 lakh pregnant women of 680 districts across the country.
  • About 76.7 % of the households in the rural and about 96 % in the urban areas had houses of pucca structure.
  • A 10 Year Rural Sanitation Strategy (2019-2029) launched to focus on sustaining the sanitation behavior change and increasing access to solid and liquid waste management.

19. Industry and Infrastructure

  • The industrial sector as per Index of Industrial Production (IIP) registered a growth of 0.6 per cent in 2019-20 (April-November) as compared to 5.0 % during 2018-19 (April-November).
  • Total telephone connections in India touched 119.43 crore as on September 30, 2019.
  • The installed capacity of power generation has increased to 3, 64,960 MW as on October 31, 2019 from 3, 56,100 MW as on March 31, 2019.
  • Service Sector contributes about 55 % of the total size of the economy and GVA growth, attracting two-thirds of total FDI inflows into India.

20. Sustainable Development and Climate Change

  • Forest and tree cover increased to reach 80.73 million hectare i.e. 24.56 % of the geographical area of the country.
  • (Gross Value Added) GVA at Basic Prices for 2019-20 from ‘Agriculture, Forestry and Fishing’ sector is estimated to grow by 2.8 %.
  • Agricultural productivity is also constrained by lower level of mechanization in agriculture which is about 40 % in India, much lower than China (59.5 %) and Brazil (75 %).

During the last 6 years ending 2017-18, Food Processing Industries sector has been growing with an Average Annual Growth Rate (AAGR) of around 5.06 %. It constitutes as much as 8.83 % and 10.66 % of GVA in Manufacturing and Agriculture sector respectively in 2017-18 at 2011-12 prices.

Source – PIB

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