India’s economy is expected to contract by 7.7% during the financing year ending March 31, despite a sharp rebound seen in the second half of the year following a contraction of 15.7% in the first half, according to the annual Economic Survey.
It estimated the contraction in the second half of the fiscal year at a marginal 0.1% as the industry resumed operations in the aftermath of the once-in-a-century pandemic. Based on trends available between April and November 2020, there is likely to be a fiscal slippage this year.
But the economy’s growth is projected to rebound to 11% during the next financial year starting April 1, driven mainly by government consumption.
The survey highlighted that the government enforced one of the world’s toughest lockdown to deal with the pandemic to save lives, recognising that the economy would eventually recover.
Going forward, as the economy recovers, the prime focus will be on creating employment for the millions who lost jobs during the pandemic, it added.
“After experiencing a sharp contraction of 23.9% in the first quarter of 2020-21, India is expected to be the fastest growing economy in the next two years. Projections by various national and international agencies including the International Monetary Fund (IMF) project this resilience of the Indian economy,” the survey said.
However, India, which is currently the fifth-largest economy in terms of GDP, currently lags behind most other large economies on most indicators of innovation, the report added.
It highlighted that India needed to significantly ramp up investments in research and development to achieve its aspiration of emerging as the third-largest economy.
The survey said that the recent reforms in the agricultural sector — which has sparked massive protests among a section of the farmers — were more than overdue “as the existing laws kept the Indian farmer enslaved to the local Mandi (wholesale markets) and their rent-seeking intermediaries.”
“While every other category of producer in India had the freedom to decide 38 Economic Survey 2020-21 Volume 1 where to sell his/her produce, the Indian farmer did not. The local monopolists created by this legal infrastructure enabled the intermediaries to prosper at the cost of the farmer, especially the poor ones without the wherewithal to store their produce,” it added.
The survey said that the agricultural reforms enable the farmer to sell where he gets the best deal and thereby enable competition that is sine qua non to create welfare for the small farmer.
“The reforms in agriculture markets will enable creation of ‘One India one market’ for agri-products, create innumerable opportunities for farmers to move up the value chain in food processing — from farm to fork, create jobs and increase incomes,” it added.
The survey added that proposed structural reforms in the mining sector aim to increase participation of the private sector in mineral exploration, redefine the norms of exploration for auction of mineral blocks to ensure a seamless exploration-cum-mining-cum-production regime.
“They will also redefine the standard of exploration required for auctioning of blocks for prospecting license-cum mining lease and open acreage licensing policy for allocation of mining rights which will give a major boost to the production of minerals in the country,” it added.
The survey said that these reforms aim to reduce the country’s dependence on imported coal as well as to create a strong, self-reliant domestic energy sector that will attract private investments and generate jobs.
The efforts will synergise with production-linked incentive (PLI) schemes in ten key manufacturing sectors that aim “to enhance exports and make India an integral part of the global supply chain.”
The survey noted that while export of gems and jewellery, engineering goods, textile and allied products slipped during the year, shipments of drugs and pharmaceuticals, software and agriculture recorded growth. It added that pharma exports in particular have the potential to emerge as the pharmacy to the world.
Simultaneously, there is a need to increase spending on health from 1% of the GDP to 2.5-3% of the GDP with a sectoral regulator to supervise the healthcare sector, lower insurance premiums and strengthen telemedicine links across the country, according to the survey.