Economic Survey 2020-21: Recovery in H2 FY 21 to be powered by Government Consumption
The notable highlights in the Survey included the mention of India expected to have a Current Account Surplus of 2 per cent of GDP in FY21, which will be a historic high after 17 years. On the supply side, Gross Value Added (GVA) growth has been pegged at -7.2% in FY21 as against 3.9% in FY20.
The survey mentions that the Agriculture sector is set to cushion the shock of the COVID-19 pandemic on the Indian economy in FY21 with a growth of 3.4%. The survey acknowledges that the Industry and services sectors are estimated to contract by 9.6% and 8.8% respectively during FY21.
"India remained a preferred investment destination in FY 2020-21 with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies. Net FPI inflows recorded an all-time monthly high of US$ 9.8 billion in November 2020, as investors’ risk appetite returned," the Survey said.
In fact, the Survey mentions that India was the only country among emerging markets to receive equity FII inflows in 2020.
The Survey also mentioned that the Forex reserves increased to a level so as to cover 18 months' worth of imports in December 2020 and the ratio of forex reserves to total and short-term debt improved because of the sizable accretion in reserves.
In fact, the Survey says that a V-shaped recovery is underway, as demonstrated by a sustained resurgence in high-frequency indicators such as power demand, e-way bills, GST collection, steel consumption, etc.
On the vaccination drive, the Survey maintains that India became the fastest country to roll-out 10 lakh vaccines in 6 days and also emerged as a leading supplier of the vaccine to neighbouring countries and Brazil.
Healthcare takes center stage, finally!
COVID-19 pandemic emphasized the importance of the healthcare sector and its inter-linkages with other sectors - showcased how a health crisis transformed into an economic and social crisis, the Survey said.
"India’s health infrastructure must be agile so as to respond to pandemics - healthcare policy must not become beholden to ‘saliency bias’," it said.
The Survey noted that the National Health Mission (NHM) played a critical role in mitigating inequity as the access of the poorest to pre-natal/post-natal care and institutional deliveries increased significantly. The survey notes that the emphasis on NHM in conjunction with Ayushman Bharat should continue.
It mentions that an increase in public healthcare spending from 1% to 2.5-3% of GDP can decrease the out-of-pocket expenditure from 65% to 35% of overall healthcare spending.
The Survey also talks about setting up a Health Regulator for India. "A regulator for the healthcare sector must be considered given the market failures stemming from information asymmetry," it said.
Fiscal Developments
The Survey says that India adopted a calibrated approach best suited for a resilient recovery of its economy from the COVID-19 pandemic impact, in contrast with a front-loaded large stimulus package adopted by many countries.
It added that the Monthly GST collections crossed the Rs 1 lakh crore mark consecutively for the last 3 months, reaching its highest levels in December 2020 ever since the introduction of GST
India’s forex reserves, according to the Survey, were at an all-time high of US$ 586.1 billion as of January 08, 2021, covering about 18 months' worth of imports. The Current Account Surplus, the Survey said, is at $34.7 billion (3.1% of GDP). "India to end with an Annual Current Account Surplus after a period of 17 years," it said.
Trade balance with China and the US improved as imports slowed. Net services receipts amounting to $ 41.7 billion remained stable in April-September 2020 as compared with $40.5 billion in the corresponding period a year ago, the Survey said.
Prices and Inflation
As per the survey, the inflation averaged 6.6% during April-December 2020 and stood at 4.6% in December 2020, mainly driven by an increase in food inflation (from 6.7% in 2019-20 to 9.1% during April-December 2020, owing to build up in vegetable prices)
The rural-urban difference in CPI inflation saw a decline in 2020. Since November 2019, CPI-Urban inflation has closed the gap with CPI-Rural inflation Food inflation has almost converged now Divergence in rural-urban inflation observed in other components of CPI like fuel and light, clothing and footwear, miscellaneous etc.
Agriculture and Food Management
India’s Agricultural (and Allied Activities) sector showed its resilience amid the adversities of COVID-19 induced lockdowns with a growth of 3.4% at constant prices during 2020-21 (first advance estimate), the Survey said. The share of Agriculture and Allied Sectors in Gross Value Added (GVA) of the country at current prices stood at 17.8% for the year 2019-20 (CSO-Provisional Estimates of National Income, 29th May, 2020). The total food grain production in the country in the agriculture year 2019-20 (as per Fourth Advance Estimates), stood at 11.44 million tonnes more than during 2018-19.
The survey said that 1.5 crore dairy farmers of milk cooperatives and milk producer companies’ were targeted to provide Kisan Credit Cards (KCC) as part of Prime Minister’s AatmaNirbhar Bharat Package after the budget announcement of February 2020. As of mid-January 2021, a total of 44,673 Kisan Credit Cards (KCCs) have been issued to fishers and fish farmers and an additional 4.04 lakh applications from fishers and fish farmers are with the banks at various stages of issuance
The Pradhan Mantri Fasal Bima Yojana covered over 5.5 crore farmer applications year on year and claims worth Rs. 90,000 crore paid, as on 12th January 2021.
"An amount of Rs. 18000 crore have been deposited directly in the bank accounts of 9 crore farmer families of the country in December 2020 in the 7th installment of financial benefit under the PM-KISAN scheme," it said.
