The Economic Survey 2021-22 was released along with the Budget, as is the case every year. The central theme of this year’s survey revolves around the agile approach of the government towards the country’s economy. While this emerged as a necessity as a result of the pandemic, the survey this year describes how such an approach has become central to the governments planning. The approach is based on having access to real-time information which will then enable policy responses that are customised to deal with the situation on hand. The survey, however, maintains that such an approach does not mean that the government’s vision has shifted from its longer-term goals. The dynamic approach that is being championed is meant to serve the government’s vision for the country’s future.
The survey begins with a look at the State of the Indian Economy. The outlook is positive, with the authors claiming that growth for the 2022-23 period is expected to be in the range of 8%-8.5%. Having said that, the survey acknowledges the uncertainty of the pandemic. Inflation is currently high all around the world and central banks are expected to further tighten their grip on liquidity. Despite this, the government has committed to increasing its capital expenditure as it feels confident that it will meet its budgetary targets.
The second chapter explores the Fiscal Developments of the previous year. It is mentioned that tax revenue collection increased by more than 67% year-on-year against an expectation of just 9.6%. It is this increase that forms the foundation for the government’s plan to increase its capital expenditure for the coming year. The government debt has increased by more than 10% to 59.3% but the government believes that this will be brought under control with the recovery of the economy.
The next chapter deals with the country’s External Sector. Both exports and imports surpassed the pre-pandemic levels during the financial year. The main trading partners remain the USA, UAE, and China. By November 2021, India’s foreign exchange reserves reached $633 billion making it the 4th largest forex reserves holder after China, Japan, and Switzerland. The balance of payments as of the first half of 2021-22 stood at a surplus of $63 billion.
The fourth chapter deal with the Monetary Management and Financial Intermediation of the economy. After two years of successive rate cuts, the repo rate has been maintained at 4%.
While liquidity in the economy had been increasing over this time, it has done so at a slower pace in recent months. Bank credit growth has been strong in the agricultural sector but less so with respect to manufacturing and services. 2021-22 was a good year for the capital markets with nearly Rs. 90,000 crores raised via IPOs alone.
The next chapter is about Prices and Inflation. Inflation has been one of the bigger issues in recent months. According to the data, CPI inflation was observed at 5.6% in December. Prices of potatoes and onions returned to normal levels as did that of tomatoes although their prices did spike during the September to November quarter. Since economic activity picked up during the year, the price and demand for crude oil also went up which is what is hinted at as being the reason for the high fuel costs witnessed for most of the year. A reduction of central excise and VAT helped stop fuel prices from going out of control.
Chapter 6 covers Sustainable Development and Climate Change. According to the NITI-Aayog’s standards, India’s overall score increased from 60 to 66 over the last year. Kerala and Chandigarh were the top-performing states with many districts in North East India also being impressive. India managed to increase its forest coverage by more than 3% over the last decade, which is the 3rd biggest increase in the world during the same period. The government is also aiming to phase out single-use plastics by 2022. The chapter highlighted the need to effectively manage groundwater levels which is in the hands of the states and UTs.
The 7th chapter deals with Agriculture and Food Management. Agriculture has grown by 3.6% and 3.9% over the last two years. Net receipts from crop production have increased by more than 20% with crop diversification by farmers being one of the goals of the government. The livestock sector has grown at a CAGR of 8.15% over the last 5 years and accounts for 15% of the average monthly income of an agricultural household. The government aims to place focus on the food processing sector going forward as it will help employ the surplus agricultural workforce along with accessing a large market.
The following chapter speaks to Industry and Infrastructure. As expected, industrial activity bounced back substantially after the lockdown of the previous year. Growth in the sector is expected to be just under 12% for this financial year. The survey cites the implementation of the production linked incentive scheme as being one of the major sources of the recovery. Capital expenditure in the railways has increased three-fold since 2014 and road construction per day has also increased by 30% in the same period.
Chapter 9 deals with the Services Sector. The recovery has seen the figures reach pre-pandemic levels with the exception of the contact-intensive subsector of ‘Trade, hotels, transport, communication & services related to broadcasting’. Gross Value Added (GVA) of services is expected to grow by 8.2% this financial year. The export of services, spurred on primarily by the IT sector, also bounced back to its pre-pandemic levels. The services sector also accounted for 54% of the total FDI inflows into the country.
There are currently 14,000 startups in the country, up from 733 in 2016-17. 44 of these startups earned unicorn status in 2021 which is a record. India is now behind only the US and China as the third largest startup ecosystem in the world.
The penultimate chapter focuses on Social Infrastructure and Employment. The finding here is that employment has returned to pre-pandemic levels according to the periodic labour force survey (PLFS). With regards to schools, colleges, teachers’ availability, the survey looks at data from 2019-20 (pre-pandemic) and finds an improvement along with enrolment rates across the upper-primary, secondary and higher secondary levels and a decrease in the dropout rates as well. The total fertility rate has come down to below the replacement level and is currently 2. Government spending on social services increased by nearly 10% in 2020-21.
The final chapter highlights the use of new techniques to collect data. Geo-spatial and cartographic techniques have been used to track the expansion of electricity supply, urban expansion, economic activity and so on. It has also been used to track the Kharif crop cycle in Punjab.
Thus the Economic Survey, although shortened this year, gives an overview of the economic activity of the country over the last year. We will go through each chapter in detail and provide an analysis in the coming weeks as a part of our budget coverage. This is a mere overview of the survey, and as can be seen, there is much to dive deeper into.