The Economic Survey for 2021-22 will be released a day ahead of the Union Budget 2022-23. Economists and analysts will be keenly awaiting its growth projections, sectoral analysis, and the rationale behind prevailing weak demand. Let’s look into its significance:
The Economic Survey is a flagship annual document which reviews the state of the Indian economy.
The survey is tabled in Parliament a day before the presentation of the budget.
However, the Constitution neither binds the government to present the Economic Survey nor is the government obliged to go with its recommendations.
It is completely left to the government to decide if it will adopt or reject the suggestions made in the Economic Survey.
The Survey facilitates a bird’s eye view of the trends noticed in different sectors over the previous year like agriculture, manufacturing, employment, infrastructure, prices, exports, imports, foreign exchange reserve, and money supply for example.
It highlights the government’s policy initiatives, reviews the performance of development programmes and discusses the prospects of the economy in the short- and medium-term scenarios.
Importantly, the survey projects the gross domestic product (GDP) growth, and provides an insight into the economic outlook for the country.
It pinpoints the quality of policy responses needed under the prevailing economic situation.
The survey provides key inputs which influence the budget-making process.
Considering the fact that it provides a detailed analysis of economic developments of the past financial year, it sets the context for the budget.
The first economic survey was released in the financial year (FY) 1950-51.
In the next 14 years that followed, it was presented along with the Union Budget.
Starting from 1964, it preceded the budget and was released a day before the budget session in the parliament.
The Chief Economic Adviser (CEA) is given the responsibility to prepare the Economic Survey.
However, this year there was no CEA. The former CEA, K Subramanian returned to academics after his tenure got over.
The Principle Economic Adviser, Sanjeev Sanyal, was given the duty to prepare the document.
The government, only recently, appointed noted economist K Anantha Nageswaran as India’s new CEA.
Since the tenure of Arvind Subramanian, the document is presented in two volumes.
The first volume generally has chapters on the future course of the economy. Therefore, the first volume provides a scope for the CEAs to narrate their views.
The second volume lists the country’s economic developments over the past year. The principal focus of the second volume is to explain the immediate economic issues faced by the different sectors with the help of statistical data. It throws light on the major challenges anticipated along with the solutions presumed.
However, this year media reports suggest that the document will have only one volume. That too, digital-only.
Most probably, this year’s Economic Report might contain the key data for the FY across different industry segments while leaving out the policy prescriptions that are usually a part of the main volume.
What to be expected?
In light of the pandemic, the trend analysis of various sectors of the economy such as agriculture, industrial production, services, construction, trade, and hotels needs to be closely watched.
Also, analysis of employment levels, trade with the rest of the world, money supply, prices, infrastructure development and other relevant economic factors should be studied.
Keeping in mind that private final consumption expenditure, which constitutes 54.5% of the GDP, is still nowhere near pre-covid levels, the rationale behind low consumption demand may be analysed. Also, the performance of micro, small, and medium enterprises and contact-intensive sectors may be closely looked at.
Based on data analysis relating to various sectors of the economy, the Economic Survey forecasts growth numbers for the Indian economy and gives the rationale for the same.
It facilitates a healthy democratic debate by highlighting gaps if any, between the required policy measures and what is politically feasible.
The first advance estimates by the government which serves as essential inputs for the Union budget have projected real GDP growth of 9.2% for 2021-22.
It is evident that the healthcare sector was the most important sector in the economy in the last year. States and the Centre channelised their funds from other sectors to the healthcare sector to cater to the growing need for hospital beds and vaccination.
Interestingly, India saw major developments in the Pharma sector with two Covid-19 vaccines being developed indigenously. The founders of Bharat Biotech and Serum Institute of India were awarded the Padma awards on January 26, 2022.
The CEA’s comment on budgetary allocation to the healthcare and pharma sector will be crucial.
The inflation figures in India have been rising. The CPI and WPI touched a four-month high in December 2021, according to data by MoSPI.
The rising prices of crude oil, along with elevating geopolitical tensions in Ukraine and the Middle East have also put pressure on the global economy.
The government does not have many options to explore given the rise in the fiscal deficit due to the pandemic.
In this respect, the way forward, outlined by CEA, will be important to watch.
Consumers will be keen to find out what the office of CEA has to say about tackling the rising inflation.
The survey might highlight the government’s compulsion to repeal the long-awaited farm reform measures.
In Budget 2021, the government had set a disinvestment target of Rs 1.75 lakh crores. Reports suggest that the government is far behind the set goal. It remains to be seen what the CEA’s office will comment on this and what roadmap will it lay in front of the government ahead of Budget 2022.
It may look at the need for speedier resolution of business disputes through judicial reforms and hint at the future course of action in this respect. The need for administrative reforms might also be discussed.
A blueprint to improve the overall business environment to make India a $5 trillion economy may be provided.
The Economic Survey is one of the most critical documents in the country’s administration. It gains utmost importance in financial planning as it contains insights on the country’s economic health. This is an invaluable document in highlighting the key concerns about the economy.