Finance Minister Nirmala Sitharaman, on January 29, tabled the Economic Survey 2021 in Parliament. In the survey, the government elaborated on the V-shaped economic recovery due to timely stringent lockdown amid COVID-19.
Economic Survey 2021 mentions that India took lessons from the Spanish flu experience and implemented an early and stringent lockdown from late March to May to curb the pace of spread of COVID-19. However, it added that this step had brought the economy to a standstill for two complete months. The inevitable effect was a 23.9 percent contraction in GDP, as compared to the previous year’s quarter.
Stating the foresight of Economic Survey 2020-21's collective vision to battle the COVID-19 pandemic and its impact on the economy for a V-shaped economic recovery, the team of economists resonated the spirit with recent Team India’s victory in Australia where their resilience to rebound from 36 all out to winning the Test series.
Economic Survey 2021 pegs India's GDP growth at 11.5% in FY22
Noting that the Indian economy started experiencing V-shaped recovery after gradual unlocking since June 2020, the survey stated the month-on-month (MoM) change in the three-month moving average of the stringency index has a positive relationship with the growth in each of the economic indicators, which supported a V-shaped recovery.
Apart from mentioning the stringency index, the economic survey pointed out the far-sighted policy response of the government for economic recovery since the unlock started. The survey stated that a step-by-step approach by the government helped ensure funds for essential activities were available despite a sharp contraction in revenue receipts.
The government ensured sectors like MSMEs, and policies like PMGKY get fiscal stimulus for ensuring food security through the public distribution system, direct benefit transfers to widows, pensioners and women, additional funds for MGNREGS, and debt moratoria and liquidity support for businesses. It also elaborated the efforts of the government under Atmanirbhar Bharat 2.0 and 3.0.
The Economic Survey applauded the timing of stimulus or expenditure push, especially the capital expenditure, after the reduction in health-related curbs, which manifested the strategy of stimulating ‘growth’ when it would be most effective. Because of this, the economic recovery gained momentum since the first quarter, it added.
Among other things, the ES-2021 said that India initiated a slew of multi-sectoral supply-side structural reforms to lend flexibility and resilience to supply chains as a part of the Atmanirbhar Bharat Mission. It added that India is the only country to have undertaken structural reforms on the supply-side at the initial stages of the pandemic. This far-sighted policy response will generate productivity gains in the medium to long term.
On the issue of jobs, the survey noted primary sector in India -- agriculture and mining sectors -- contributes around 16 per cent of Gross Value Added (GVA) while it employs around 43 per cent of the workforce. While the secondary sector provides expanded opportunities for formal employment with enhanced incomes, income stability and social security provisions.
It said that structural reforms launched by the Government – in agriculture markets, labour laws and definition of MSMEs – provide unparalleled opportunity to grow and prosper now and thereby contribute to job creation in the primary and secondary sectors. The ES-2021 also cited the three labour reforms which will benefit MSMEs to increase employment, enhance labour productivity and thereby wages in MSMEs.
Apart from these, the survey stated that proposed structural reforms in the mining sector and production-linked incentive (PLI) schemes have been implemented to make Indian manufacturers globally competitive, attractinvestment in the areas of core competency and cutting-edge technology. Also, these PLI schemes ensure efficiencies, create economies of scale, enhance exports and make India an integral part of the global supply chain, the survey added.
The upturn in the economy while avoiding a second wave of infections makes India a sui generis case in strategic policymaking amidst a once-in-a-century pandemic, said the survey.