Economic Survey 2019 outlines vision to achieve $5-trn economy: PM Modi

The expansion in the economy will be driven by investment and consumption | Photo: Shutterstock
India's economic growth, which is expected to rebound from a five-year low to 7 per cent this year, now needs to shift gears to accelerate and sustain a higher growth rate to become a $5-trillion economy by 2024-25, the pre-Budget Economic Survey said Thursday.

Investment rate, which was been declining from 2011-12, seems to have bottomed out, and is expected to pick up in consumer demand and bank lending.

However, economic slowdown impacting tax collections and rising state expenditure on farm sector may put strains on the fiscal front, the survey presented in Parliament by Finance Minister Nirmala Sitharaman said.

The real gross domestic product (GDP) growth, which slowed to a five-year low of 5.8 per cent in the first three months of 2019 - well below China's 6.4 per cent - is expected to rise to 7 per cent in the fiscal year 2019-20 that started in April.

GDP growth was 6.8 per cent in the previous 2018-19 fiscal year, down from 7.2 per cent in 2017-18.

The expansion in the economy will be driven by investment and consumption, with political stability auguring well for the growth prospects, it said adding that the upside and downside risks to growth are evenly balanced with monsoon rainfall seen tipping the scales.

But for India to become a $5-trillion economy - more than double the current size - by 2024-25, it needs to sustain a real GDP growth rate of 8 per cent, which international experience suggests is possible only through a sustained "virtuous cycle" of savings, investment and exports.

Here is how CEA @SubramanianKri summed up #EcoSurvey2019, during the ongoing press conference at National Media Centre

Watch LIVE:

— PIB India (@PIB_India) July 4, 2019

"The political stability in the country should push the animal spirits of the economy, while the higher capacity utilisation and an uptick in business expectations should increase investment activity in 2019-20," the survey said.

Authored by Chief Economic Adviser Krishnamurthy Subramanian, the survey stated that investment (especially private) is the 'key driver' that boosts demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction and generates jobs.

Oil prices, the Economic Survey 2018-19 said, will decline in current fiscal, pushing consumption.

Consumption accounts for about 60 per cent of the GDP.

"However, downside risks to consumption remain. The extent of recovery in the farm sector and farm prices will decide the push to rural consumption, which is also dependent on the situation of monsoon," it said adding that some regions are expected to receive less than normal rains, which could prove to be detrimental for crop production.

"If the impact of stress in the non-banking financial company (NBFC) sector spills over to this year as well, it may lead to lower credit offtake from NBFCs, which may dampen growth in consumption spending," it said.

The #EconomicSurvey2019 outlines a vision to achieve a $5 Trillion economy.

It also depicts the gains from advancement in the social sector, adoption of technology and energy security.

Do read!

— Narendra Modi (@narendramodi) July 4, 2019

The survey suggested policies to unshackle micro, small and medium enterprises (MSMEs) to grow, create jobs and enhance productivity. It also called for reorienting policies to promote young firms which have the potential to become big, rather than MSME firms which remain small.

The survey flagged the need to prepare for the ageing of the population, necessitating more healthcare investment and raising the retirement age in a phased manner.

Highlighting the immense potential of data of societal interest, the survey said data should be "of the people, by the people, for the people".

Stating that low pay and wage inequality remain serious obstacles towards achieving inclusive growth, it called for legal reforms, policy consistency, efficient labour markets and use of technology focus areas.

Contract enforcement, it said, remains the biggest constraint to improving Ease of Doing Business ranking.


Key points in the Economic Survey

Salient points of CEA Subramanian's first Economic Survey:

PM Narendra Modi says the survey outlines a vision to achieve a $5 trillion economy. Earlier, CEA Subramanian had said that "sustained real GDP growth rate of 8 per cent needed for a $5 trillion economy by 2024-25."

There is a need to address the "burgeoning food subsidy bill" in order to sustain the government's food security programme for the poor, the Economic Survey said.

The government, in its interim budget presented in February, had pegged food subsidy bill at Rs 1,84,220 crore for 2019-20 as against Rs 1,71,298 crore last year.

"For sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be addressed. ...The rationalisation of food subsidy and greater use of technology in food management will ensure food security for all," the survey, presented in Parliament, said.

We owe it to the country to think not only of our rights, but also of our duties, said CEA Subramanian
Filling existing judicial vacancies and improving productivity improvements in courts can address key hurdle of delays in contract enforcement and dispute resolution: CEA Subramanian

Inflation rate has moved to a more stable and low level in the last five fiscals: Survey

The country's inflation rate has moved to a more stable and low level in the last five fiscals, and controlling price surge remains a key policy focus area of the government, the Economic Survey for 2018-19 said
CEA Subramanian suggests increase in energy use so that GDP per capita rises

CEA Krishnamurthy Subramanian says Swachh Bharat Abhiyan helped improve public health. 

Classical economics thinks of humans as robots; the economic survey argues for an ambitious agenda for social change, treating humans as humans, relying on the lessons offered by Behavioural Economics: CEA Krishnamurthy Subramanian
Effective minimum wage policy can help in driving up aggregate demand: CEA Krishnamurthy Subramanian

Favourable demographics a major plus point: CEA

Favourable demographics is a major plus point for India to adopt a virtuous circle 

India should learn from China: CEA

As their economy started growing better, China started saving and investing more; India needs to learn from this and adopt a virtuous cycle: CEA Krishnamurthy Subramanian
Data as a public good can enhance the quality of people's lives, says CEA Krishnamurty Subramanian
Indian economy is poised for a take off, says CEA Krishnamurty Subramanian
Economic Survey says India could become a big manufacturer of electrical vehicles.

Private investment- key driverfor demand, capacity, labor productivity, new technology, creative destruction and job creation.

Survey departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.
India will enjoy the “demographic dividend” phase in the next two decades: CEA Subramanian

Survey makes an effort to achieve vision of $5 trn economy: CEA

This year's economic survey makes an effort to achieve PM Modi's vision of Indian economy at $5 trillion  investment is the key driver here.

Economic policy uncertainty has decreased: CEA

Economic policy uncertainty has decreased in India amidst its increase globally.

Heading to a century where data is new oil: CEA

Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.

 Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by
 Contribution of dwarfs to employment is only 14% and to productivity is a
mere 8%.
Working age population to grow by roughly 9.7mn per year during 2021-31 and 4.2mn per year during 2031-41: Economic Survey

Economic Survey proposes new minimum wage policy

Redesigning a Minimum Wage System in India for Inclusive Growth
 Survey proposes a well-designed minimum wage system as a potent tool for
protecting workers and alleviating poverty.
 Present minimum wage system in India has 1,915 minimum wages for various
scheduled job categories across states.
 1 in every 3 wage workers in India not protected by the minimum wage law.
 Survey supports rationalization of minimum wages as proposed under the
Code on Wages Bill.
 Minimum wages to all employments/workers proposed by the Survey.
 ‘National Floor Minimum Wage’ should be notified by the Central
Government, varying across five geographical regions.
 Minimum wages by states should be fixed at levels not lower than the ‘floor
 Minimum wages can be notified based either on the skills or on geographical
region or on both grounds.
 Survey proposes a simple and enforceable Minimum Wage System using
 ‘National level dashboard’ under the Ministry of Labour & Employment for
regular notifications on minimum wages, proposed by the Survey.
MSMEs dont' create enough jobs: Economic Survey

Sharp slowdown in population growth in next 2 decades

Sharp slowdown in population growth expected in next 2 decades. Most of India to enjoy demographic dividend while some states will transition to
ageing societies by 2030s.

Net employment generation in formal sector was higher at 8.15 lakh in March 2019

Net employment generation in the formal sector was higher at 8.15 lakh in March, 2019 as against 4.87 lakh in February, 2018 as per EPFO.
Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the
bottom of the pyramid.
Fiscal deficit pegged at 3.4% of GDP for 2018-19
Eco survey says Fiscal deficit pegged at 3.4% of GDP for 2018-19

Economic Survey provisionally estimates 2.9% growth rate for the agriculture,forestry and fishing sector

NBFCs faced a difficult time in FY19. Squeeze in flow of resource to NBFCs has impacted lending capability of the sector in recent quarters. Deployment of funds from MFs has turned negative, stood at -12% in April 2019: CNBC report

Slow growth, GST, farm schemes to pose fiscal challenge

Economic Survey says slow growth, GST, farm schemes to pose challenges on fiscal front: Reuters

Rural wage growth on the rise

Economic Survey says rural wage growth that had bottomed out, started to rise since mid-2018: Reuters
Investment rate, which was declining from 2011-12 seems to have bottomed out. It is expected to pick up further in the year 2019-20 on the back of higher credit growth: TV reports 

Economic Survey 2019 says lower global oil prices to boost consumption: Reuters 
Eco survey says India needs to grow at 8 percent per annum to become a $5 trillion economy by FY25: TV reports 

Trade tension may hit exports

Economic Survey 2019 says lower global growth and increased uncertainty over trade tension may hit exports: Reuters citing sources

Economic Survey says 2019-20 GDP growth seen picking up on higher private investment and robust consumption: Reuters 
Economic survey sees investment rate picking up in FY2020 on higher credit growth and improved demand: Reuters
The economic survey has predicted 7 percent GDP growth in FY20 on stable macro economic conditions: TV reports
The Economic Survey 2019 was released on Thursday by Chief Economic Advisor Krishnamurthy Subramanian. The document,  highlights the challenges in the country and point sto possible solutions. It was tabled in Parliament by Finance Minister Nirmala Sitharaman.

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