Video Summary

[RSTV The Big Picture] Economic Survey 2019-20

So far India have been focusing on policy about eradicating poverty, where real question on wealth creation. The overall message of the survey is economy should grow faster but don’t be so exuberant.
By IT's Video Summary Team
February 21, 2020

Content

  • Introduction
  • What is an Economic Survey?
  • Key highlights of the Survey
  • What are the Microeconomics and Macroeconomics?
  • Fiscal Deficit
  • Gross Domestic Product
  • Export factor
  • Wealth Creation
  • Banking and Non-banking financial institution (NBFC)
  • Other Concerns
  • Conclusion

Economic Survey 2019-20

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Introduction:

The Economic Survey 2019-20 projected growth for the next fiscal starting April 2020-21 at 6 per cent to 6.5 per cent. The pre-budget survey has retained the growth numbers for the current fiscal at five per cent and it stressed on the need to relax fiscal deficit for the current fiscal to revive growth. It also called for more reforms for making it easier to do business in India.

What is an Economic Survey?

  • An Economic Survey is a snapshot of the major economic developments that have taken place in the last one year and gives a glimpse of what is to come ahead in the short to medium term. It essentially lays the groundwork for the presentation of Budget.

Key highlights of the Survey:

  • The survey observed that there is an urgent need to remove red tape at ports to promote exports apart from eliminating other business hindrances such as registering property, paying taxes and enforcing contracts.
  • While it mentioned that weak global growth has impacted India, it also acknowledged the fact that investment has slowdown due to domestic financial sector issues.
  • The Economic Survey also said that the government must deliver on reforms quickly as it is the only way to enable an economic recovery in the upcoming fiscal.
  • Improving governance in public sector banks and the need for better disclosure of information other key steps recommended by the Economic Survey.

What are the Microeconomics and Macroeconomics?

  • Microeconomics is the study of individuals and business decisions, while macroeconomics looks at the decisions of countries and governments.
  • Investors can use microeconomics in their investment decisions, while macroeconomics is an analytical tool mainly used to craft economic and fiscal policy.

Fiscal Deficit:

  • On fiscal side, survey consults, the current year fiscal deficit will be exceeded over 3.3% but the same time it expresses caution for next year fiscal consolidation program because there is a need of increasing investments in infrastructure sector.
  • The survey cautions the outlining the dangers of the government investments, increasing at a higher rate that might be negative effects on more government borrowing which is higher fiscal deficit.
  • Survey mentioned that considering the urgent priority of the government to revive growth in the economy, the fiscal deficit target may have to be relaxed for the current year.
  • Survey recognizes fact that the increasing fiscal deficit can have down side apart from stimulating growth.

Gross Domestic Product:

  • Survey provides alternative assessments to GDP growth and suggests the addition of new economic firms that probably an alternative way of judging the current GDP level whether under estimated or over estimated.
  • Domestic financial sector has strain on Indian economy and crisis it dragged down the investment, negative impact on GDP growth rate and need to be fix.

Export factor:

  • Survey talks about the export promoting and getting rid-off red tapism and it have a lot focus on ease of doing business that have connection to the export sector that need to focus on adequate exchange rate policy.
  • Survey projects 4 crore jobs that would be created by 2025 and export as being main vehicle for creation of jobs.

Wealth Creation:

  • India is leading in the entrepreneurships in terms of new firms are opening up. (India is the world’s second most entrepreneurial country.)
  • Economic survey acknowledges that the growth is on down side and India is not achieving its full potential that should have been but survey mentions the wealth creation is more important.
  • Survey argues the reorientation of policies toward the wealth creation of economy by promoting more market economy, less government intervention, promoting entrepreneurships, reforming the financial sectors in banks, NBFCs that have major role in economy.
  • There is a need to underline for disinvestments and more on that with impact of past time about it to realize the more value that creating more wealth for investors.
  • PSUs which have been privatized or disinvested have done better for remaining shareholders and for the companies after the privatization.

Banking and Non-banking financial institution (NBFC):

  • Survey argues that India need to modernize both the banking and NBFCs sector by using new technologies like artificial Intelligence, big data analysis.
  • Among the many down sides, the Survey lists global headwinds, slow process of resolution of stressed assets under insolvency and bankruptcy code.
  • It basically argues that the government sets up a GST kind of body which can gather data to guide the flow of the credit and also to forecast the emerging areas as consults.
  • It argues that NBFCs sector has been borrowing too much short terms and its obligation have long terms and these mismatch need to be resolve.
  • Survey recognizes more steps and vigilance is required that the banking sector’s ability to provide analysis and credit for economic credits is not constrain.
  • India need to create alternative market channels of loans and investments for the corporate sectors so that they don’t need to only rely on the banking sector but if they want they can go to foreign loans.
  • Surveyprovides very useful index for gazing the heath of financial sector which it offers the policy makers to presumably in governments and also in Reserve bank of India for a sense estimation, early signals of some stressed developing in financial sector.

Other Concerns:

  • Survey recognizes fact that If India borrows from the market, it will crowd out private investment. Because there is a serious deficit in revenue collection, part of the procedure of divesting of PSUs will probably go to meetings of revenue of expenditure that have inflationary impact and that alreadyimpacted in Food Price Index which effects common men.
  • ES argues for deregulation for repeal of essential commodity act, factory acts and restructuring of the food corporation of India.The survey acknowledges the prime agenda on wealth creation policy through entrepreneurships from grassroot level.
  • Survey over the years have gone beyond, just presenting the state of the economy and always come up with new ideas, new tools for understanding what is happening in country and giving people something to think over on it.
  • Survey said there are tentative signs of bottoming out of slowdown in manufacturing activity and global trade, which will have a positive impact on growth in the next fiscal and Survey is itself conservative with regard to both fiscal imbalances in domestic economy and external imbalance.
  • Survey cautions the government that if government want to spend more money, spend it in a manner that it doesn’t raise interest rate in market and if government want to private sector to borrow money, don’t make them too independent on foreign borrowings that may affects current account balance.
  • The survey sees some green suits of the recovery in terms of whether it is a Purchasing Managers’ Index (PMI) or some freight of movement index, ease of doing business index and also kind of mega infrastructure plan put on place.

Conclusion:

Survey asks government to deliver expeditiously on reforms to revive growth. So far India have been focusing on policy about eradicating poverty, where real question on wealth creation. The overall message of the survey is economy should grow faster but don’t be so exuberant.

There is clear message from survey that the disinvestments and privatization are going to be a very critical and important. If India is good in divesting the public sector undertakings that can perhaps generate kind of resource for the inclusive development of country.

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