India’s Gross Domestic Product growth rate will contract by 7.7% in the current financial year (2020-’21), while it is projected to grow by 11% in 2021-’22, the government said on Friday in this fiscal’s Economic Survey. The Survey’s growth rate projection for this financial year is the same as the first advanced estimate released by the government earlier this month.
The government also hinted that the fiscal deficit may overshoot the budget estimate of 3.5% of GDP, but did not give any specific figure. “In order to sustain the recovery in aggregate demand, the government may have to continue with an expansionary fiscal stance,” the survey said. Fiscal deficit could come at over 7%, Reuters had reported earlier this month, quoting people aware of the Union Budget discussions.
In terms of trade data, the survey predicted that India will have a current account surplus for the first time in 17 years, which is expected to come at least 2% of the GDP in this financial year. The Survey also showed that that the government fell short of its budget estimates for tax revenues and receipts through disinvestment. In terms of taxes, the government’s earnings fell 10.26% on a year-on-year basis during the April-November period. On the other hand, it could only garner Rs 15,220 crore through the disinvestment route, against a target of Rs 2.1 lakh crore.
As for specific sectors, the Survey said that agriculture will be the best performer, clocking a 3.4% growth in the financial year ending on March 31, while industry and services will contract by 9.6% and 8.8%, respectively.
While the Survey forecast a “V-shaped” economic recovery, it also cautioned that it would take at least two years to revert to pre-pandemic gross domestic growth levels.
“With the economy’s returning to normalcy brought closer by the initiation of a mega vaccination drive, hopes of a robust recovery in services sector, consumption, and investment have been rekindled,” said the survey.
‘Mature’ policy response to Covid-19
The Survey extensively claimed that India’s response to the coronavirus pandemic was a “mature” one, that focused on “short-term pain and long-term gain”. Addressing a press conference on the Survey, Chief Economic Advisor Krishnamurthy Subramanian, said that India realised that growth rate will eventually recover but it was essential to save human lives during the pandemic.
Backing this statement, the survey claimed that the early and stringent lockdown imposed in India, led to over 37 lakh less cases and over 1 lakh less deaths, caused due to coronavirus in the country.
The Survey also defended the Centre’s decision to support the supply side of the economy, rather than the demand side, in early stages of the pandemic. “During the initial months of the pandemic when uncertainty was high and lockdowns imposed economic restrictions, India did not waste precious fiscal resources in trying to pump up discretionary consumption,” the Survey said.
The Survey, penned by Subramanian and his team, was tabled in the Parliament earlier during the day by Union Finance Minister Nirmala Sitharaman. Usually, the Economic Survey is placed a day ahead of the Union Budget, but this year it had to be tabled earlier as Friday was the last session of the Parliament ahead of Budget Day on February 1.