economy survey, 8.5% expansion

finance minister Nirmala Sitharaman – India may again become the world’s fastest growing economy: Economic Survey

India has the fiscal legroom to boost spending to achieve record growth, likely wresting the title of the world’s fasted growing economy from China, according to the Budget-eve Economic Survey presented in the Parliament by finance minister Nirmala Sitharaman on Monday.

The economy will expand 8%-8.5% in the year starting April after likely growing 9.2% in the current fiscal year, going by the annual economic document.

The document, which was unveiled a day ahead of the presentation of the Union Budget, said the government had the fiscal legroom to boost investment and spending. Growth will be propelled by “widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending.”

For the second year running, Asia’s third-largest economy has been hit by the Covid-19 pandemic, as disruptions and uncertainty caused by repeated waves have impacted private consumption, consumer behaviour, and supply chains. The pandemic has also accelerated shifts towards online technologies.

The Survey said advance estimates suggest the economy was expected to “witness real GDP expansion of 9.2 per cent in 2021-22 after contracting in 2020-21”.

This, the Survey said, implied that overall economic activity had recovered past the pre-pandemic levels. “Almost all indicators show that the economic impact of the ‘second wave’ in Q1 was much smaller than that experienced during the full lockdown phase in 2020-21 even though the health impact was more severe,” the economy’s report card said.

According to the Survey, Agriculture and allied sectors were “least impacted” by the pandemic. The farm sector, which is critical because it employs half of all Indians, is expected to grow by 3.9% in 2021-22 after growing 3.6% in the previous year.

Sounding optimistic, the Survey said: “With the vaccination programme having covered the bulk of the population, economic momentum building back and the likely long-term benefits of supply-side reforms in the pipeline, the Indian economy is in a good position to witness GDP growth of 8.0-8.5 per cent in 2022-23.”

A key message from the Survey tabled in Parliament is the government’s readiness to ramp up public spending by taking on record debt.

The Survey pointed to a strong revival in revenues. Revenue receipts were up over 67% year on year in April-November 2021. “(This) means that the Government has fiscal space to provide additional support if necessary.”

“The projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be orderly,” the Survey said.

Fiscal stimuli to the economy and the response to the pandemic have caused the country’s fiscal deficit and government debt to rise in 2020-21. “However, a strong rebound in government revenues in 2021-22 has meant that the Government will comfortably meet its targets for the year while maintaining the support, and ramping up capital expenditure,” the Survey said.

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