India’s economy is ﬁrmly in the middle of a Vshaped recovery and will bounce back to record 11% growth in 2021-22 after an estimated 7.7% contraction this year as per estimates in the Economic Survey for 202021.
What is it?
- Economic survey is a summary of the annual economic development in our country during the previous financial year.
- This survey, which is released every year, analyses the trends in prices, agriculture, infrastructure, employment, industrial production, money supply, foreign exchange reserves, exports, imports and other factors that have an impact on the Indian economy and the budget.
- It also deals with the economic growth forecasts and gives detailed analysis on the causes that it believes will pave the way for the expansion or deceleration of the economy.
Significance of Economic Survey 2021
- The Economic Survey 2021 has great importance owing to the COVID-19 pandemic and its effect on our country's economy.
Saving Lives and Livelihoods: India’s response to ‘onceinacentury’ crisis: a lesson for democracies to avoid myopic policy
- According to the Economic Survey 2021 the policies adopted by the Government of India ad mist the COVID-19 pandemic was guided by Research in Epidemiology and Economics. This helped in minimizing large losses.
- The government’s response was also based on the extensive research on the Epidemiology, analysing the 1918 Spanish Flu epidemic.
- Flattening the pandemic curve was necessary as that gives time for strengthening the health and testing infrastructure.
- The research made observations that the pandemic spreads faster in areas with higher/denser populations. It also says that the intensity of the lockdown is vital in the beginning of the pandemic.
- The research revealed that even a slight increase in the population density has significant impact on the spread of the disease. This principle guided India's policy response.
- Indian government acknowledges that intense lockdown in the beginning saved human lives and at the same time will enable a quicker economic recovery.
Demand-side & Supply-side policies
- Pandemic had both supply and demand side impact. The demand side impact was distinct.
- India's policy response considered the nuanced effect of the pandemic on demand.
- Pradhan Mantri Jan Dhan Yojana balances increased during the lockdown
- India responded to COVID-19 in a calibrated manner. Initially, the focus was on providing necessities.
- About 18 crore people were provided with free food.
- Emergency credit measures were provided
- Liquidity measures and forbearance were announced
- Under the unlock phase, India announced demand side measures to enable discretionary consumption including the Aatmanirbhar Bharat II and III measures, which were focused on capital expenditure and wage subsidy programme.
- Structural reforms were announced to better supply in medium to long run to avoid loss of productive capacity.
- The reforms mainly focused on strengthening the potential of primary and secondary sectors and job creation, with the aim to enable aggregate demand.
- The reforms included crafting of labour laws, broad reforms in agriculture, MSMEs, BPO services, Power, Mineral, Defence and Space sector and strategic PSUs policy.
- The survey revealed that an increase in public health expenditure from the present 1% to 2.5% of GDP can reduce out-of-pocket spending from 65% to 30% of overall healthcare spending. This was planned in the National Health Policy.
- The Economic Survey also noted that the National Health Mission activities should carry on since it is giving increased access of the poorest to pre-natal & post-natal care, & institutional deliveries.
- It was observed that for India to respond to epidemics/pandemics, health infrastructure must incorporate flexibility
- The survey revealed that telemedicine needs to be enhanced by investing in network infrastructure, hence speeding up internet connectivity & also health infrastructure, as it has good potential to provide health access in remote areas.
- The importance of designing policies that mitigate information asymmetry in healthcare was highlighted. It causes market failures & hence renders sub-optimal private healthcare which are not regulated.
- Economic Survey 2021 claims that Ayushman Bharat has resulted in improved health outcomes.
- It also says that PM-JAY program has bettered health outcomes like maternal health & child health, access to family planning, awareness on diseases in comparison with non-PMJAY States.
- The Survey also reveals PM-JAY program’s continued practice resulting in significant life-saving procedures like dialysis being available without any delay even during the lockdown period.
Bare Necessities Index
- Bare Necessities Index at rural, urban & all India level has been created by this survey. It has 26 indicators on 5 dimensions:
- other facilities
- The Economic Survey observes that all states have improved on access to bare necessities in 2018 in comparison to 2012.
- The highest access was recorded in states like Punjab, Kerala, Gujarat and Haryana and lowest was recorded in Jharkhand, Odisha, West Bengal and Tripura.
- The inter-state disparities in the access to “the bare necessities” also showed a decline in 2018 in comparison to 2012 across rural & urban areas.
- The survey also states that the access to the bare necessities has improved disproportionately more for the poorest households in comparison to the richest households across rural & urban areas.
- The Economic Survey noted that better access to bare necessities is related to improvement in health indicators such as infant mortality and under-5 mortality and improvement in education indicators.
- India entered top 50 innovating countries for the first-time in 2020, according to the survey.
- Government aid to research and development is thrice the average contributed by governments in the top 10 economies.
- But India’s business sector only contributes 37% gross expenditure on R&D when compared with the contribution of businesses in each of the top 10 economies, which is 68% on average.
- The resident share in patent applications must rise for India. Indian residents contribute only 36% of patents filed in India as against average of 62% in top 10 economies.
- India must focus more on strengthening institutions & business sophistication to improve its performance on innovation output.