Economic Survey 2018-19: Key takeaways
The Economic Survey provides an authoritative, detailed and official annual summary of the current state of play in the Indian economy which will act as a policy guideline to the Union Budget.
The Economic Survey 2019 was tabled in the both the houses of Parliament by Union Finance Minister Nirmala Sitharaman, a day before the Union Budget. The report, which shows the health of various indicators like jobs, farm sector, manufacturing, services, education, projected the GDP growth for 2019-20 at 7 per cent, up from 6.8 per cent in the previous fiscal. It also pegged the fiscal deficit for 2018-19 at 5.8 per cent, up from revised budget estimate of 3.4 per cent.
All eyes were on Budget 2019 and Economic Survey 2019 after a recent data released by the government showed a slump in GDP growth rate and high rate of unemployment in the country.
Here are the key highlights from the Economic Survey 2019 report:
Private Investment Key to Growth, Jobs, Exports, and Demand
The Economic survey 2018-19 report projected that India needs to sustain a GDP growth of 8 per cent in order to become a $5 trillion economy by 2025. It said that a “Virtuous Cycle” of savings, investment and exports catalysed and supported by a favourable demographic phase is required for sustainable growth.
Social Infrastructure, Employment and Human Development
The report highlighted the importance of public investments in social infrastructure, like education, health, housing and connectivity for inclusive development. The government expenditure as a percentage to GDP on Health was 1.5 per cent last year and in the education sector, the same figure stood at 3 per cent in 2018-19.
The net employment generation in the formal sector was 8.15 lakh in March, 2019, according to EPFO estimates, but the unemployment rate stood at a 45-year high at 6.1 per cent, as per NSSO figures. About 1.54 crore houses completed under Pradhan Mantri Awas Yojana (PMAY) by 31st March, 2019. About 1.9 lakh km of rural roads constructed under Pradhan Mantri Gram Sadak Yojana (PMGSY) since 2014.
MSMEs—Profits, Productivity, and Job Creation
More than 50 per cent of all organised firms in manufacturing (by number) are dwarfs—firms with less than a 100 workers—despite being more than 10 years old. Their contribution to employment is only 14 per cent and to productivity is a mere 8 per cent. In contrast, large firms with more than 100 employees account for 75 per cent employment and close to 90 per cent of productivity despite accounting for about 15 per cent by number.
The report suggested deregulating labor law restrictions to create significantly more jobs, managing direct credit flow to young firms in high employment elastic sectors, and a sunset clause of less than 10 years for all sized-firms.
A National Level Minimum Wage
Presently, minimum wage system in India has 1,915 minimum wages for various scheduled job categories across states. But one in every three wage workers is not protected by the minimum wage law.
The Economic Survey 2018-19 called for bringing in a mandatory national level minimum wage that will allow states to pay more than the floor rate, but not less.
Increasing the Lower Court’s efficiency
Delays in contract enforcement and disposal resolution are arguably now the single biggest hurdle to the ease of doing business and higher GDP growth in India. Around 87.5 per cent of pending cases are in the District and Subordinate courts.
A 100 per cent clearance rate can be achieved by filling out merely 2279 vacancies in the lower courts and 93 in High Courts. States of Uttar Pradesh, Bihar, Odisha and West Bengal need special attention. Also, productivity improvements of 25 per cent in lower courts, 4 percent in High Courts and 18 percent in Supreme Court can clear backlog.
India’s population growth will see a sharp slowdown
The Economic survey report projected a sharp slowdown in population growth expected in next two decades. By 2021, the National Total Fertility Rate is expected to be below replacement rate. The working age population is expected to grow by roughly 9.7 million per year during 2021-31 and 4.2 million per year during 2031-41. A significant decline is expected in elementary school-going children (5-14 age group) over next two decades.
Affordable, Reliable, Sustainable Energy
India now stands at fourth in wind power and fifth in solar and renewable power installed capacity. It requires 2.5 times increase in per capita energy consumption to increase its real per capita GDP by $5,000 at 2010 prices, and enter the upper-middle income group. Though the share of renewable energy—excluding hydro above 25 MW—in total electricity generation increased to 10 per cent in 2018-19, thermal power still plays a dominant role at 60 per cent share.