Economic Survey: India’s GDP to contract by 7.7% in 2020-21, grow by 11% in 2021-22

• The Survey has also predicted a V-shaped economic recovery

• India to have a current account surplus of 2 percent of GDP in FY21, a historic high after 17 years

New Delhi: The Economic Survey of 2020-21, which was presented by Finance Minister Nirmala Sitharaman on Friday, has pegged the contraction in the Indian economy at 7.7 percent in 2020-21 and the real GDP growth to touch 11 percent in 2021-22. The Survey has also predicted a V-shaped economic recovery due to mega vaccination drive, robust recovery in the services sector and due to resurgence in high frequency indicators such as power demand, rail freight, e-Way bills, GST collection, steel consumption etc.

The GDP growth projection of 11 percent in 2021-22 is close to the growth of 11.5 percent forecast by the International Monetary Fund (IMF). However, the bump in growth looks large only because of the low base in 2020-21 when the economy is projected to contract by 7.7 percent. 

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Here are the highlights:

• Agriculture to clock 3.4 percent growth, while industry and services to contract by 9.6 percent and 8.8 percent respectively this year
• India to have a current account surplus of 2 percent of GDP in FY21, a historic high after 17 years
• Net FPI inflows recorded an all-time monthly high of 9.8 billion dollars in November 2020
• The trend of underutilisation of defence budget has also been reversed from financial year 2016-17. The allocation of defence budget, including civil estimates and pensions for 2020-21, was Rs 4,71,378.00 crore, which was Rs 40,367.71 crore over the budget estimates of 2019-20.
• The health outcomes of the States that adopted Pradhan Mantri Jan Arogya Yojana (PM-JAY) improved when compared to the States that did not adopt the scheme.
• The Rs 1.46-lakh crore PLI scheme is expected to make India an integral part of the global supply chain and create huge employment opportunities.
• The infrastructure sector will be the key to overall economic growth and macroeconomic stability. The year after the crisis (2021-22) will require sustained and calibrated measures to facilitate the process of economic recovery and enable the economy to get back on its long-term growth trajectory.
• The Economic Survey 2020-21 said that sovereign credit ratings methodology must be amended to reflect economies' ability and willingness to pay their debt obligations, and suggested that developing economies must come together to address this bias and subjectivity inherent in sovereign credit ratings methodology.
• An increase in government spending on the healthcare sector – from the current 1 percent to 2.5-3 percent of GDP – as envisaged in the National Health Policy 2017 could reduce out-of-pocket expenditures.
• New farm laws herald a new era of market freedom which can go a long way in improving lives of small and marginal farmers in India.
• Access to the bare necessities has improved across all States in the country in 2018 as compared to 2012. It is highest in States such as Kerala, Punjab, Haryana and Gujarat while lowest in Odisha, Jharkhand, West Bengal and Tripura. It improved disproportionately more for the poorest households when compared to the richest households across rural and urban areas.
• Regulatory forbearance is an emergency medicine, not staple diet.
• India over-regulates the economy resulting in regulations being ineffective even with relatively good compliance with process. The root cause of the problem of overregulation is an approach that attempts to account for every possible outcome.

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