Finance Minister Nirmala Sitharaman tabled the annual economic survey in the Parliament on Thursday, one day before she presents the Budget for the fiscal year that ends in March 2020.
“Growth in the economy is expected to pick up in 2019/20 as macroeconomic conditions continue to be stable,” said the finance ministry’s chief economic adviser, Krishnamurthy Subramanian, the report’s main author.
Prime Minister Narendra Modi’s government is widely expected to push up spending in Friday’s Budget to spur activity, by offering tax incentives to boost consumer demand and investment, officials of his political party said.
Here are some of the reactions on the Economic Survey 2019:
Former finance minister P Chidambaram on Thursday said there are no sector-wise growth projections in the pre-Budget Economic Survey and the government itself appears to be pessimistic about the economy.
In a statement, the senior Congress leader said the findings of the economic survey 2018-19 were neither positive nor encouraging. “It appears to me that the government, speaking through the economic survey, is pessimistic about the economy,” he said.
Indian realtors and fintech firms have, however, welcomed the Economic Survey’s focus on the liquidity issue. They hailed Sitharaman for hitting at the root cause of all ills widely prevailing all sectors of India Inc.
Arindam Guha, Partner, Deloitte India said the use of data for the public good is expected to be one of the cornerstones for new forms of public-private partnerships. With the deregulation of most sectors in the economy, significant transaction-level data is also generated by private sector players in sectors like mobility (app cabs), banking & insurance, health, etc. Incentivizing the private sector to share this data with the government through suitable policy incentives can provide rich insights for futuristic policy formulation, he said. Similarly, using this data to kick start the innovation and start-up eco-system in the country can be a win-win for start-ups as well as government, Guha added.
Minimum wages need to be used as a strategic tool as it can play a significant role for the redeployment of surplus manpower from sectors like agriculture into rural infrastructure development like piped water transmission and distribution networks, watershed development, irrigation, etc. However, to ensure that the cost of infrastructure being developed is competitive, labour productivity would also need to increase—it is here that having focused skill development initiatives at the regional/local levels involving private construction agencies would be key, Guha said.
DK Srivastava, Chief Policy Advisor, EY India said, “The Economic Survey 2018-19 implies scope for fiscal expansion in the context of cooperative federalism. With the central fiscal deficit at 3.4 percent and state fiscal deficit at 2.6 percent, the general government fiscal deficit was at 5.8 percent of GDP, after accounting for on-lending from the Center to the extent of 0.2 percentage points of GDP. States can potentially increase their capital expenditure on infrastructure while remaining within their aggregate FRBM limit of 3 percent of GDP so as to effectively complement Center’s growth-oriented infrastructure expansion plans.”
Economic Survey 2019 highlights the ongoing slowdown in economic growth and suggests that there is a need to revive the same. This can come only through invigorating the manufacturing, infrastructure and service sectors by prioritizing and pumping liquidity into these sectors, said Vijay G. Kalantri, President, All India Association of Industries.
Arun M Kumar, Chairman & CEO, KPMG in India said the Economic Survey of 2018-19 ‘rightly identifies’ growth and jobs as the two fundamental aspirational objectives for the government. “A key tenet of the Survey is that “policymaking must keep real people as its focus” and that the insights from behavioral economics need to be integrated into aspects of policymaking, as has been demonstrated by the success of the ‘Beti Bachao Beti Padhao’ campaign and the Swachh Bharat mission. The Survey also emphasizes the need to treat data as a public good. The Survey notes the need to further accelerate legal sector reforms and to strengthen contract enforcement regulations. There is also a welcome emphasis on better management of the environment, on sustainable energy and on electric vehicles,” he said.
Commenting on the Economic Survey released on Thursday, Chandrajit Banerjee, Director General, CII, said, “The 7 percent growth pegged by the Economic Survey for 2019-20 is a pragmatic target and with the right policy levers in place, we can step-up growth to sustain an average growth rate of 8 percent over the next five years. A concerted effort is required to drive an improvement in private investment along with robust consumption to lift growth in the current fiscal from a multi-year low of 6.8 percent posted in 2018-19. However, the headwinds to growth as underlined by the Survey in the form of weaker exports growth and stress in the shadow banking system are the main areas of concern which have been highlighted by CII as well, said Banerjee.
Ranen Banerjee, Partner and Leader-Public Finance and Economics, PwC India, said the Survey has pegged the growth of Indian economy at 7 percent for FY20. To be able to get the momentum up from the last quarter growth rate of 5.8 percent to an annual growth rate of 7 percent, it will require a huge boost in spending by the government. “We can expect higher allocations in the budget for capital spending as well as social spending to boost jobs and demand. There can be a short term realignment of the fiscal consolidation map with the deficit targets being marginally raised from 3.4 percent in FY19,” he said.
Elias George, Partner and National Head-Infrastructure, Government and Healthcare (IGH) at KPMG in India, said, in tune with the new national aspiration of India becoming a 5 trillion dollar economy in the next five years, the Economic Survey has focused on the need for ramping up private investment as a key driver of growth, jobs, exports, and demand. “It also emphasizes the need to ensure clarity and stability in economic policy, while refreshing laws and regulations, as well as to further reform the judicial system. The survey adopts a novel approach of focusing on the insights gleaned from behavioral economics to drive change, and to attain desired outcomes.