Economic Survey 2021-22, which Finance Minister Nirmala Sitharaman tabled in the Lok Sabha on Monday, has forecast 8-8.5 per cent growth in 2022-23. For 2021-22, 9.2 per cent expansion of gross domestic product (GDP) has been projected. Apart from that, there is little in the Survey that suggests anything about the direction Budget 2022-23 would take; nor are there any policy recommendations for the government.
Normally, the Chief Economic Adviser (CEA) authors the Economic Survey. The previous CEA, K.V. Subramanian, demitted office in December 2021 after the completion of his three-year term. It was only last week that the government appointed economist V. Anantha Nageswaran, who earlier worked with Credit Suisse Group AG and Julius Baer Group.
So, it was Sanjeev Sanyal, Principal Economic Adviser, who prepared the Survey this year. It looks like he has tried to play safe, not coming up with anything that could land him in trouble. Accordingly, the Survey is long on details and some exotic terms — waterfall method, barbell strategy, agile approach. And, it is short on analysis and recommendations.
Survey 2021-22 has correctly highlighted the government’s achievements. It says, “Another distinguishing feature of India’s response [to the COVID-induced slowdown] has been an emphasis on supply side reforms rather than a total reliance on demand management. These supply side reforms include deregulation of numerous sectors, simplification of processes, removal of legacy issues like ‘retrospective tax’, privatisation, production-linked incentives and so on. These have been discussed in detail in the respective chapters. Even the sharp increase in capital spending by the Government can be seen both as demand and supply enhancing response as it creates infrastructure capacity for future growth. This year’s Survey particularly highlights the importance of process reforms in a number of sectors…”
Abrogation of retrospective taxation was indeed a big step; such taxation had not just become a bane for the economy, deterring foreign investors from putting their money in India, but also had the potential to cause international humiliation. Imagine India’s assets being forfeited in another country.
Privatisation, now called National Monetisation Programme, is another policy initiative which has the potential of replenishing the exchequer, galvanising good public sector undertakings (by handing them over to private enterprise), and telling the world that India has turned its back on socialism.
It, however, needs to be mentioned that compulsion rather than choice dictated these policy shifts. Retrospective taxation, which was linked with national pride by its author Pranab Mukherjee and several functionaries in the Narendra Modi government, was done away with when it became evident that this could lead to seizure of Indian assets abroad. Similarly, privatisation was restarted when the sale of Air India became unavoidable.
Still, it must be said to the credit of the government, that it did do the right things.
Production-linked incentives are also good. If successful, they can lead to strengthening of supply chains. It must be mentioned here that the use of the term ‘supply chains’ is somewhat misleading; it seems to suggest that something new is needed, whereas the fact is that here the emphasis is on boosting manufacturing.
Unfortunately, manufacturing has been shrinking since 2011-12. Its share in the country’s gross value added (GVA) has come down from 17.4 per cent in 2011-12 to 14.5 per cent in 2020-21. The Survey says, “In 2020-21, the share of manufacturing fell to 14.4 per cent but is expected to improve to 15.3 per cent in 2021-22.”
The optimism may not be grounded in reality. The Survey says, “Among the top ten countries for import origin, China, UAE and USA were the top import sources for India in April-November 2021, with China’s share reducing to 15.5 per cent from 17.7 per cent in corresponding period a year earlier — reflecting increased diversification of India’s import sources.”
The diversification may be true, and China’s share in overall merchandise imports too may have declined, but imports from China hovered around $100 billion for the first time in calendar year 2021; this was more than the pre-COVID level. We continue to depend on Chinese electrical and electronic goods (particularly smartphones), machinery, fertilisers, active pharmaceutical ingredients or APIs, etc. This is despite the restrictions the Modi government put on Chinese imports.
In other words, while the Survey did underline good policy measures by the government, it was not keen on highlighting the shortcomings.
On the whole, Economic Survey 2021-22 is a document that no economist will call a mandatory read.
The author is a freelance journalist. The views expressed in this article are those of the author and do not represent the stand of the publication.
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