On February 1, 2021, Parliament will meet for the Union Budget 2021. Union Budget 2021: Conventional halwa ceremony took place on January 23. NEW DELHI: The traditional halwa ceremony, which marks the documents’ presswork for the Union Budget. The ceremony will be hosted by the finance ministry ahead of the Union Budget’s performance on February 1.
After the Halwa Ceremony there one more important formality is the Economic Survey. The Economic Survey table took place on January 31, 2021. There are two volumes of the economic Survey. The Finance Minister Of India started the conference by saying The Economic Survey 2021 elucidates how India has resolute battled the unprecedented Crisis triggered by the COVID19 pandemic.
However, India has chartered its unique trajectory showing remarkable resilience in Saving Lives And Neighbourhood. India’s mature and calibrated policy response to turn the Crisis into an opportunity helped control the pandemic and cushion the economy.
What is an Economic Survey
The Economic Survey is the flagship yearly document of the finance ministry. It reviews India’s economic development over the past financial year by giving detailed statistical data of industrial, agricultural, and manufacturing sectors. The Finance Minister of the country presents the Economic Survey.
Economic Survey 2021
The Economic Survey of 2021 is in two volumes. The first volume is divided into ten different parts, which includes:
Saving Lives and Livelihoods amidst a Once In a century Crisis.
Does Growth Lead To A Debt Sustainability?
Does India’s Sovereign Credit Rating Reflect its Fundamentals?
Inequality and Growth: Conflict or Convergence.
Healthcare takes Centre Stage, Finally!
Regulatory Forbearance an emergency medicine, not a staple diet!
Innovation: Trending Up but Needs Thrust, Especially from the Private Sector.
JAY ho! PM-JAY Adoption and health outcomes.
The Bare Necessities.
Chapter 1 Economic Survey: Saving Lives and Livelihoods amidst a Once In a Century Crisis
The opening line of the chapter of the Survey is a shlok from Mahabharat that states
आपदि प्राणरक्षा हि धर्मस्य प्रथमाङ्कुरः
which means Saving a life that is in jeopardy is the origin of dharma. In this chapter, COVID19 is referred to as “Once In A Century Crisis.”
It further explains the topic by stating The world has endured a year of an unexpected onslaught by the novel COVID-19 virus – SARS-CoV-2 – first identified in Wuhan city of China in December 2019. The virus has posed an unprecedented challenge for policymaking, globally and nationally.
Although It has tested policymakers’ mettle to deal with uncertain, fluid, complex, and dynamic situations with far-reaching socioeconomic implications. It has also pushed medical science frontiers, which increased the challenge by developing an effective vaccine within a year. The improvement and courses in spreading the virus across major countries showed that established cases spread exponentially once neighborhood transmission began.
Understanding the epidemic dynamics posed challenges as a large fraction of interested people were asymptomatic but were potentially contributing to the spread of the pandemic. By the end of February 2020, the virus had spread to over 54 countries, infected more than 85,403 individuals worldwide, and made around 3,000 deaths.
Indian Strategy To Cope COVID19
The rising exponential number of cases witnessed daily compelled the World Health Organization (WHO) to title this outbreak a pandemic on March 11, 2020 – within three months of its emergence. It has affected around 9.6 crore people originating at an average rate of 3.3 percent per day within a year.
The number of daily cases is furthermore rising, with more than 6 lakh cases per day. The pandemic has accounted for 20.5 lakh death across 220 countries, with a global case fatality rate of 2.2 percent as of January 1, 2020. However, in the pandemic’s initial stages, the world ordinary case fatality rate (CFR) was much higher at 5-6 percent. These features have made the virus lethal.
The only strategy that seemed viable for containment of the pandemic was active monitoring, early detection, privacy and case administration, contact reproduction, and inhibition of onward spread by following social distancing and safety precautions.
Various non-pharmaceutical attacks (NPIs) – such as lockdowns, closure of schools and non-essential business, travel restrictions – were, therefore, embraced by countries across the globe. These were aimed to slow down the transmission of infection or ‘flatten the epidemic curve’ and buy the wellness care system some time to handle the rush in demand for its assistance and the development of effective treatment and a vaccine.
Chapter 2 Economic Survey: Does Growth Lead To A Debt Sustainability?
The opening lines of the second chapter of the Economic Survey is a Shlok from Mahakavi Kalidasa’s Raghuvansham that says
वागर्थाविव संपृक्तौ वागर्थप्रतिपत्तये।
जगतः पितरौ वन्दे पार्वतीपरमेश्वरौ॥
which means The state collects tax for its citizens’ greater welfare in the same way as the sun evaporates water, only to return it manifold in the form of rain. The chapter talks about Amidst the Covid-19 Crisis, fiscal policy has allowed enormous significance across the world. Naturally, the discussion around higher Government debt to support a budgetary improvement is accompanied by anxieties about its proposals for future growth, debt sustainability, sovereign ratings, and possible surface sector vulnerabilities.
This chapter examines the optimal fiscal policy stance in India during a crisis. It establishes that the growth leads to debt sustainability in the Indian context and not necessarily vice-versa.
While the fiscal policy is especially salient during a financial crisis. In general, budgetary management must be counter-cyclical to smooth out economic cycles, preferably of exacerbating them. As seen for the United States and the United Kingdom, the correlation between private and public sector net balances is almost entirely negative. In India, however, fiscal policy has not been counter-cyclical in general.
In a country like India, which has a comprehensive workforce engaged in the natural sector, counter-cyclical monetary policy becomes even more paramount.
However, in India, there is the segmentation of public sector labor markets. Such crowding out of private sector work is minimal (Michaillat, 2014). Thus, debt-financed public investment is more cost-effective to manipulate during recessions than during economic booms.
The Differential and Debt Sustainability in India
As fiscal policy correlates very closely with the debate on government debt, we explain the conceptual underpinnings of the connection between public debt and growth, as seen in the simple equation for debt dynamics.
Chapter 3 Economic survey: Does India’s Sovereign Credit Rating Reflect its Fundamentals
The opening line of the chapter is a quote from Rabindranath Thakur that says
Where the soul is free, and you gain respect, is the place you belong. Into that heaven of freedom, my Father, let my country awake. The third chapter talks about The discriminatory treatment against an emerging giant in sovereign credit ratings.
Since 1994, the only times that the fifth largest economy’s sovereign credit; Evaluations in current US dollar terms have precipitously declined has been when emerging giants China and India have come to occupy the position. The sovereign credit rating of the fifth largest economy (current US$) by two credit rating companies(CRAs) declined steeply in 2005 following China’s entry into the top five economies. Furthermore, the sovereign credit rating of the fifth largest economy (current US$) by two CRAs descended steeply in 2019 following India’s entry into the top five economies.
INDIA’S SOVEREIGN CREDIT RATINGS
This anomaly in sovereign credit ratings has been maintained for India. Currently, India is considered investment grade by three major CRAs – S&P, Moody’s, and Fitch. India’s sovereign credit ratings during 1998-2020 explain the same by these CRAs. India’s sovereign credit rating declines during 1998-2018 are mainly limited to the 1990s on account of the post-Pokhran sanctions in 1998.
Further, during most of the 1990s and mid-2000s, India’s sovereign credit rating was the speculative-grade. India’s credit rating was upgraded to Moody’s investment grade in 2004, Fitch in 2006, and S&P in 2007. Notably, the Indian economy grew at an average rate of over six percent. Approximately eight percent in several years during this period. Thus, during most of the 1990 and early 2000s, India’s high economic growth rate co-existed with a sovereign credit rating of “speculative grade.”
Chapter 4 Economic Survey: Inequality and Growth: Conflict or Convergence?
The Economic Survey 2019-20 argued that ethical wealth creation. Combining the invisible hand of markets with the writing of trust – provides India’s way to develop economically. An often-repeated concern expressed with this financial model pertains to inequality. In the advanced economies, Wilkinson and Pickett (2009), Atkinson (2014). Including Piketty (2020) show that higher inequality leads to adverse socioeconomic outcomes.
Still, income per capita, a measure that indicates the impact of economic growth, has little effect. Some commentary, especially in advanced economies post the Global Financial Crisis, argues that inequality is no accident but an essential feature of capitalism. Such commentaries, thus, highlight a possible conflict between economic growth and inequality.
The significant poverty reduction that high economic growth has delivered in India and China presents the unique challenge to this notion of conflict between economic growth and inequality.
Could both the absolute poverty levels and economic growth rates are low in advanced economies generate this conflict? So, could it be that a developing economy such as India can avoid this conflict because of the potential for high levels of economic growth? On the one hand, and the significant scope for poverty reduction, on the other hand? This question becomes pertinent, primarily because of the inevitable focus on inequality following the COVID-19 pandemic.
GROWTH, INEQUALITY, AND SOCIOECONOMIC OUTCOMES: INDIA VERSUS THE ADVANCED ECONOMIES
In the advanced economies, Wilkinson and Pickett (2009), Atkinson (2014), and Piketty (2020) show that higher contrast leads to adverse socioeconomic outcomes. Furthermore, income per capita, a measure of economic growth, has little impact. This section examines whether these findings apply to India. The statistics show the correlation of socioeconomic outcomes with inequality and income per capita across advanced economies and Indian states.
Chapter5 Economic Survey: Healthcare takes Centre Stage, Finally!
The opening line of chapter 5 is a quote by Mahatma that says It is health that is real wealth and not pieces of gold and silver. The chapter talks about the health of the nation. A nation’s health depends critically on its citizens having access to an evenhanded, affordable, and accountable healthcare system. Health affects domestic economic growth directly through labor productivity and the financial burden of illnesses (WHO 2004).
Increasing life expectancy from 50 to 70 years (a 40 percent increase) could raise the economic growth rate by 1.4 percentage points per year (WHO 2004). The statistics say life expectancy in a country correlates positively with per-capita public health expenditure. Maternal mortality correlates negatively with increases in per-capita public health expenditure.
Chapter6 Economic Survey: Process Reforms
India’s regulatory problems are often due to the lack of regulatory standards and poor compliance to process. However, international comparisons show that India ranks better than its peers on having regulatory measures and keeping to process.
The real issue seems to be the effectiveness of regulations caused by undue delays, rent-seeking, complex regulations, and regulation quality. The ‘World Rule of Law Index’ published by the World Justice Project1 provides a cross-country comparison on various aspects of regulatory enforcement.
The index has multiple sub-categories, which capture compliance to due processes, effectiveness, timelines, etc. In 2020, India’s rank was 45 out of 128 countries in the category of ‘Due process is respected in administrative proceedings. In contrast, in the category ‘Government regulations are effectively enforced, its rank is 104.
India stands at 89th rank in ‘Administrative Proceedings are conducted without unreasonable delay. 107th in ‘Administrative Proceedings will be implemented in the future. This shows that, contrary to popular belief, India is relatively good at complying with processes but lag in regulatory effectiveness.
Chapter7 Economic Survey: Regulatory Forbearance an emergency medicine, not a staple diet!
The opening line of the chapter is a quote by George Santayana, a Spanish philosopher that says
Those who do not learn from history are condemned to repeat it.
To address the economic hurdles posed by the Covid-19 pandemic, financial regulators across the world have adopted regulatory Forbearance. India is no exemption.
Emergency measures such as abstinence prevent spillover of the financial sector’s failures to the real sector, thereby avoiding a crisis. Therefore, like crisis medicine, Forbearance occupies a legitimate place in a policy maker’s toolkit.
However, caution must be exercised, so that crisis medicine does not become a staple diet due to borrowers and banks can easily get addicted to such palliatives.
When emergency medicine becomes a staple diet, the adverse side effects may be large and last for a while.
Therefore, carefully examining and understanding the implications of previous forbearance episodes is relevant to guide future policy. In 2008, anticipating the global financial Crisis, RBI introduced the policy of regulatory Forbearance.
THE ORIGINAL SIN: THE SEVEN-YEAR FORBEARANCE!
The forbearance policies had desired short-term economic effects. GDP growth increased from a low of 3.1% in FY2009 to 8.5% within two years. There was Regulatory Forbearance: An Emergency Medicine, Not Staple Diet! Two hundred three a marked improvement in other economic indicators ranging from exports to the Index of Industrial Production (IIP).
The growth in total revenue of listed firms also recovered from a low of 4.88% during the Crisis to a high of over 20% in 2011. The increase in bank credit, which had fallen from 22.3% in FY2008 to 16.9% in FY2010, recovered quickly to 21.5% in FY2011.
The time was therefore ripe to remove the Forbearance. After all, emergency medicine had worked in restoring the health of the economy. However, the central bank decided to continue with the same. The tolerance continued for five more years until 2015, even when its removal was recommended – a clear case of emergency medicine chosen to be made into a staple diet.
Chapter8 Economic Survey: Innovation: Trending Up but Needs Thrust, Especially from the Private Sector.
India entered the top 50 innovating countries for the first time in 2020 since the inception of the Global Innovation Index (GII) in 2007, by improving its rank from 81 in 2015 to 48 in 2020.
To herald this significant achievement while setting out the path for further progress, the Survey examines India’s innovation performance on various dimensions. India ranks first in Central and South Asia and third amongst lower-middle-income group economies. Among the seven pillars of the GII, India ranks 27th in knowledge and technology outputs (KTO).
31st in market sophistication; 55th in business sophistication, 60th in human capital and research (HCR); 61st in institutions; 64th in creative output. 75th in infrastructure. India ranks tenth in knowledge diffusion and 15th in trade, commerce, and market scale among sub-pillars.
Among parameters, India ranks first in ICT services exports. Third in domestic market scale (PPP); Ninth in Government’s online services. Ninth in the growth rate of productivity; 12th in science and engineering graduates; 13th in ease of protecting minority investors; 15th in e-participation; 16th in the average expenditure of top three global R&D companies, and 19th in market capitalization.
Chapter9 Economic Survey: JAY ho! PM-JAY Adoption and health outcomes.
As free markets under-provision public goods, a government’s vital role is to provide public goods to its citizens, especially society’s vulnerable sections.
While the rich can seek private alternatives, lobby for better services, or, if need be, move to areas where public goods are better provided for, the poor rarely have such choices (Besley and Ghatak, 2004). Thus, the provision of public goods can significantly affect society’s vulnerable sections’ quality of living.
Yet, governments may suffer from the “horizon problem” in a democracy, where the time horizon over which the interests of public goods reach the electorate may be longer than the electoral cycles (Keefer 2007 and Keefer and Vlaicu 2007). Myopia emerging from the horizon problem may again lead to under-provisioning of public goods. Thus, the provision of public goods that produce long-term gains to the economy and the society represents an essential aspect of governance in a democratic polity.
Chapter10 Economic Survey: The Bare Necessities.
The Last Chapter of the volume states a quote from the Jungle Book that says Look for the bare necessities, The simple bare necessities. Forget about your worries and your strife. I mean the bare necessities!
Since the 1950s, when Shri Pitambar Pant advocated the idea of “minimum needs,” economic development can be viewed as providing the “bare necessities of life” to citizens around India. A family’s ability to access bare necessities – such as housing, water, sanitation, electricity, and clean cooking fuel – has been regarded as an essential weatherglass of economic development in academic and policymaking circles. This idea of reaching the bare necessities of life as a sine qua non has resonated with the common man.
No wonder Bollywood’s rhetoric, which often mirrors socio-economic issues in the country (Desai, 2004), has rushed in on “the bare necessities” in films such as Roti, Kapda Aur Makaan (1974).
A movie by Shri. Amitabh Bachchan, in the 1989 film Main Azaad Hoon highlights the definition of “the bare requirements” to the ordinary man. The song “the bare necessities” in Rudyard Kipling’s The Jungle Book apprehends their persona too.
The Sustainable Development Goals (SDGs) focus on implementing “the bare fundamentals” to all: Goal 6 concentrates on access to clean water and sanitation.
Goal 7, amongst other things, aims to achieve unlimited access to electricity and sanitary cooking fuel. The Economic Survey 2019-20 granted access to food through the idea of “Thalinomics: The Economics of a Service of Food in India.” In this chapter, the Economic Survey models on that application by monitoring its progress on providing “the bare necessities” to its citizens.
Conclusion To Economic Survey Volume 1
Volume one of the Economic Survey talks about all the problems and the solutions. Including the regional issues, economic diversity due to COVID19, and the most controversial issue, the Farmers protest. The Union Budget 2o21 is expected to solve all the Crises our nation faced. Budget 2021 is going to be a ray of hope in these dark times for our country.