Union Finance Minister Nirmala Sitharaman tabled her first Economic Survey ahead of full fledged Union Budget 2019. It was prepared by Chief Economic Adviser Krishnamurthy Subramanian. It lays out roadmap for Union Government's next five years.
The theme of Economic Survey 2019 is about enabling “shifting of gears" to sustained economic growth for objective of $5 trillion by 2024-25. It departs from traditional thinking by advocating growth model for India that views economy as being either in virtuous or vicious cycle, and thus never in equilibrium.
State of the Economy in 2018-19: A Macro View
- India still the fastest growing major economy in 2018-19.
- Growth of GDP moderated to 6.8 % in 2018-19 from 7.2 % in 2017-18.
- Inflation contained at 3.4 % in 2018-19.
- Non-Performing Assets (NPAs) as%age of Gross Advances reduced to 10.1 % at end December 2018 from 11.5 % at end March 2018.
- Current account deficit manageable at 2.1 % of GDP.
- Fiscal deficit of Central Government declined from 3.5 % of GDP in 2017-18 to 3.4 % in 2018-19.
- Provisional estimate of 2.9% growth rate for the agriculture, forestry and fishing sector.
Highlights from the Economic Survey 2019
- Private Investment: It is key driver of simultaneous growth in demand, jobs, exports & productivity, capacity, labor productivity, new technology, creative destruction and job creation.
- Government proposes to increase retirement age.
- Data should be of the people, by the people, for the people.
- Government proposes complete overhaul of minimum wages in India.
- Dwarfs (firms with less than 100 workers) account for more than 50% of all organized firms in manufacturing by number. Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.
- To achieve vision of $5 trillion economy by 2024, India needs to shift its gears to accelerate and sustain a real GDP growth rate of 8%.
- Using insights from behavioral economics to create aspirational agenda for social change.
- From ‘Beti Baco Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi).
- From ‘Swachh Bharat’ to ‘Sundar Bharat’
- From ‘Give it up" for the LPG subsidy to ‘Think about the Subsidy’.
- From ‘Tax evasion’ to ‘Tax compliance’.
- Behavioral economics provides insights to ‘nudge’ people towards desirable behavior.
Key principles of behavioral economics:
- Emphasizing the beneficial social norm.
- Changing the default option.
- Repeated reinforcements.
- Swachh Bharat mission: 93.1% of the households have access to toilets. 96.5% of those with access to toilets are using them in rural India.
- India still the fastest growing major economy in 2018-19. Growth of GDP moderated to 6.8 per cent in 2018-19 from 7.2 per cent in 2017-18.
- Accommodative RBI policy will help to cut real lending rates.
- Political stability may push animal spirits of economy
- January-March 2019 economic slowdown due to election related activity.
- NBFC sector stress reason for FY19 slowdown.
- Oil prices seen declining in Financial Year 2020.
- Declining in NPA should push up capital expenditure cycle.
- Government policies expected to further lift restrictions on FDI inflows.
- 2019-20 GDP growth seen picking up on robust consumption and higher private investment.
- Exports may be hit by lower global growth, increased uncertainty over trade tension.
- Investment rate picking up in FY2020 on higher credit growth and improved demand.
- Working-age population will grow by about 97 lakhs per year in the upcoming decade.