The Economic Survey on Friday projected revival of economic growth to 6-6.5 per cent in the next fiscal beginning April 1 but suggested the government to relax the budget deficit target to boost growth from a decade low.
The Survey, released a day before Finance Minister Nirmala Sitharaman presents the Union Budget for 2020-21, called for cutting food subsidy while at the same time looking at businessmen with respect as they create wealth and jobs.
Facing the worst economic slowdown since the global financial crisis of 2008-09, the Survey called for boosting manufacturing with 'assemble in India for the world' concept so as to boost job creation. For the current fiscal, it projected a GDP growth of 5 per cent, the lowest in 11 years, and worsening job prospects.
"The deceleration in GDP growth can be understood within the framework of a slowing cycle of growth with the financial sector acting as a drag on the real sector," it said.
"The government must use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21."
Survey-author Krishnamurthy Subramanian, Chief Economic Adviser to the Finance Ministry, rejected his predecessor Arvind Subramanian's analysis of India's GDP growth rate being overestimated by 2.7 per cent post-2011, saying the allegation was "unfounded" and "unsubstantiated by the data".
As has been argued earlier, the government has to prioritise growth, the Survey for 2019-20, which was tabled by Ms Sitharaman in Parliament, said. And for this, relaxing the fiscal deficit target could be considered, said the Economic Survey -- an annual report card on the economy.
Ms Sitharaman had projected the fiscal deficit at 3.3 per cent of the gross domestic product in her budget for 2019-20 but it is widely seen slipping to 3.8 per cent as the slowdown lowered revenue collections and the government provided a tax stimulus to spur investments.
This will be the third straight year when the government will miss its fiscal deficit target.
Once the momentum picks up, the government can take action to consolidate its expenses. Several economies have done this in the past. Cutting some of the Rs 1.84 lakh crore food subsidy bill can create the fiscal space, the Survey said. It emphasized on raising capital expenditure (and reducing revenue expenditure) that leads to asset creation. This means economic growth, which primarily is driven by consumer spending, has to now come from greater investments.
The Survey emphasized on investment-led growth by focusing on reviving the MSME sector. To further make it easier to do business, it suggested removing the red tape at ports to promote exports as well as measures to make it easier to start a business, register property, pay taxes and enforcing contracts.
It also called for improving governance in public sector banks and the need for more disclosure of information to build trust.
It also talks about dwarfism in the banking sector.
Printed in lavender colour - the same as the colour of the new 100 rupee currency note, the oldest currency note in circulation in the country, the theme of this year's economic survey is wealth creation.
Stating that only when wealth is created, it can be distributed, Mr Subramanian said, "A feeling of suspicion and disrespect towards India's wealth creators is ill-advised."
"Given India's 'tryst' with Socialism, skepticism about the benefits of wealth creation is not an accident," he said in the Survey which devoted an entire chapter on clearing skepticism about the benefits accruing from a market economy, both in economic thinking and policy-making.
In an attempt to boost demand, the Reserve Bank cut interest rate by 110 basis points in 2019 while the government speeded up the insolvency resolution process under Insolvency and Bankruptcy Code (IBC) and easing of credit, particularly for the stressed real estate and Non-Banking Financial Company (NBFCs) sectors.
"Impact of critical measures taken to boost investment, particularly under the National Infrastructure Pipeline, present green shoots for growth in the second half of 2019-20 and 2020-21," it said. Listing global trade tensions and oil prices rising from an escalation in US-Iran standoff as downside risks to growth, it said GDP growth of India should strongly rebound in 2020-21 on a low statistical base of 5 per cent growth in 2019-20.
"On a net assessment of both the downside/upside risks, India's GDP is expected to grow in the range of 6.0 to 6.5 per cent in 2020-21," it said.
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