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The Economic Survey (Survey) of India for the financial year (FY) 2019-20 is out in the public domain today. The Survey is a report card of the Indian economy for the year under consideration and generally forms the basis for building the Union Budget for the next year to come. Such a Survey gives the statement of affairs and numbers on the performance, including the expenditure incurred against the budgeted provisions of the last financial year. In short, the document is akin to an Annual Report of a company providing analysis, explanations and past financial statements and numbers.
The Survey released today places the State of Economy in line with the global slowdown. With the globe now being a single marketplace, any country in the world cannot act in isolation when it comes to production and demand. The output of an economy is based on some other economy’s input. Therefore, while the consumption factors slow down in the world, the impact would be seen on the Indian economy.
Despite the global slowdown where the world output is estimated to grow at a pace of 2.9 per cent declining from 3.6 per cent and a 3.8 per cent in the year 2018 and 2017 respectively, India is poised to grow at a rate of 5 per cent in FY 2020-21 as per the advanced estimates (In FY 2018-19 the growth rate was marginally below 7 per cent). The above-average number proves the confidence shown in the country by foreign investors and foreign multinationals. The Survey states that FY 2019-20 has seen impressive Foreign Direct Investments (FDI), rebounding of portfolio flows and accretion of foreign exchange reserves. Coupled with the positive scenario, the Current Account Deficit has rationalised to 1.5 per cent owing to a decrease in the import and import prices of the Crude.
The Survey further highlights that not all has been hunky-dory in the Indian economy. There have been signs of stress in the financial sector, with a fall in demand, coupled with a rise of headline inflation due to a temporary increase in food inflation owing to an erratic monsoon season. Appropriate measures have been incorporated to boost growth including easing of credit and monetary policy, faster resolutions under Insolvency and Bankruptcy Code and certain cuts in corporate tax rates.
In an interesting statistical interpretation, the Survey states that the Indian economy particularly moves in a cycle of 13 quarters from high to low. Considering the mathematics, the Survey provides optimism towards growth with the Quarter 2 of the FY 2019-20 recording the lowest growth and from thereon picking up the momentum. A resurgence in growth is, accordingly, expected to begin through the Quarter 4 of FY 2019-20.
Importantly the Survey provides for an outlook as a navigation path through global trade turmoil and geopolitical tensions to achieve the objective of fiscal consolidation and restoration of growth rate. The silver lining is the “Make in India” project, which is aiming to take India to the next level by boosting exports, expansion in domestic manufacturing, increase in employment opportunities and last but not the least climbing up the ladder in “Ease of Doing Business”.
Contributed by Team TransPrice
The Economic Survey – 2019-20 could be accessed at https://www.indiabudget.gov.in/economicsurvey/