Arshad Shaikh analyses the Economic Survey which was tabled by the Union Finance Minister for the financial year 2022-23. The Economic Survey is an official document that lays down the economic outlook for the country in the coming years in terms of various macroeconomic indices like growth, inflation, unemployment, etc. The current survey tries to assert that the task of India’s economic recovery after the pandemic has been accomplished and the country is truly on the path of fast economic growth. The veracity of this claim needs to be checked as the situation on the ground does not appear to corroborate the survey’s sweeping avowal of “recovery complete.”
The Economic Survey of India is released every year by the Ministry of Finance and presented in Parliament by the Finance Minister. The Union Budget is presented the following day. The survey is prepared by the Economics division of the Department of Economic Affairs (DEA). The ownership of the survey rests with the Chief Economic Advisor (CEA). Our current CEA is V. AnanthaNageswaran. The Economic Survey primarily looks at the state of the Indian economy in the last 12 months and prepares the economic outlook for the current financial year. It looks at the macroeconomic indicators in detail and gives an idea about the direction of the economy.
However, since the survey is a compilation of data and an official presentation by the government, it is natural for the document to be a window to what the establishment wants to showcase. The wheat needs to be separated from the chaff if we wish to arrive at an independent assessment on our economic health.
ECONOMIC OUTLOOK
The Economic Survey reminds us about the tremendous efforts undertaken by the government to achieve the second largest vaccination drive in the world that delivered over 2 billion doses. Another notable achievement for the government is the increased offtake of credit for the MSME sector. However, we are still not out of the woods after the pandemic, as there are ongoing challenges like the fall in the rupee, due to possible rate hikes by the Federal Reserve (America’s Central Bank).
Rising commodity prices, including fuel prices of diesel and petrol continues to pile pressure and widen our current account deficit (CAD). As far as the Economic Outlook for medium term is concerned, the survey is quite bullish about our growth prospects. The survey says: “With improved and healthier balance sheets of the banking, non-banking and corporate sectors, a fresh credit cycle has already begun, evident from the double-digit growth in bank credit over the past months.
“Additionally, the economy has started benefiting from the efficiency gains resulting from greater formalisation, higher financial inclusion, and economic opportunities created by digital technology-based economic reforms. Thus, India’s growth outlook seems better than in the pre-pandemic years, and the Indian economy is prepared to grow at its potential in the medium term.”
POSITIVES
Some of the positives listed in the survey are as follows: GST collections have registered an uptick. Capital expenditure is increasing steadily. State governments have been incentivised by offering interest-free loans and by increasing credit limits. Capex growth will boost infrastructure like roads, rails, housing, etc. An increase in repo rates by the RBI has tightened monetary policy clearing excess liquidity and improved the balance sheets of banks and lending institutions.
According to the survey, the unemployment rates have fallen from 5.8% in 2018-19 to 4.2% in 2020-21. Over 28.5 crore workers have registered for eShram, the national database for unorganised workers. In terms of transition to renewable energy sources, India has already achieved its target of 40 per cent installed electric capacity from non-fossil fuels ahead of 2030. The Indian agriculture sector has been growing at an average annual growth rate of 4.6% since the last six years. The PMI-Manufacturing, for example, has remained in the expansionary zone for 18 months since July 2021. India was among the top ten services exporting countries in 2021. We had a market share of 4% in terms of international commercial services exports. We have made immense strides in Digital Public Infrastructure (DPI) and Unified Payment Interface (UPI) based transactions. We have successfully launched 5G telecom services.
THE SOCIAL SECTOR
The government has increased its spending on the social sector. Overall, social sector expenditure saw an increase from `9.1 lakh crore in 2016 to `21.3 lakh crore in 2023. Despite the increase in health expenditure, it is still 2.1% of GDP. Again, despite an increase in the spending on education, it is just 2.9% of GDP. Many experts have demanded that the allocation to health and education should be at least 3% and 6% of GDP respectively.
The government claims that nearly 22 crore people have benefited from the Ayushman Bharat Scheme. In terms of moving towards the Sustainable Development Goal of halving poverty by 2030, the survey says more than 41 crore people have exited poverty from 2005-2021. These numbers may sound pleasing but why is India ranked 107 out of 121 countries on the Global Hunger Index? India’s rank in the Global Health Security Index is 66/195.
According to government NFHS data, more than half of young children under the age of four in India were underweight and stunted. The 41 crore people exiting poverty is pre-Covid data. As per NSO data, 12.6% of students drop out of school in India, 19.8% discontinue education at the secondary level, and 17.5% drop out at the upper primary level.
According to the 2011 Census, about 8.15% (98 million) Indians are University graduates. It is undeniable that we have made some progress in the social sector, but we have a long way to go.
THE MISSING BLOCK
The direction of our economic policy is aimed at the growth and creation of wealth. Little attention is paid to wealth distribution. The policies mainly benefit capitalists and a limited segment of the urban elite. The concentration of wealth increased and the poor became poorer and the rich became richer. The interests of the capitalists and elite foreign businesspersons gain precedence over the interests of the poor.
As a result, despite being one of the world’s leading countries in terms of economic growth and the number of super-rich, we have not been able to erase the stigma of being the country with the largest number of poorest people. This is creating a sense of deprivation in a large section of the people in the country and violent movements are emerging as a reaction to this grotesque inequality.
Policies should be aimed towards the welfare of the people of the country and their vital interests. The role of the government in managing the economy is not merely that of a coordinator or a regulator. It is the foremost duty of the government to ensure the welfare of the people and cater to the basic needs of the poor.
Similarly, it is the responsibility of the government to formulate policies for the equitable distribution of wealth. The government must ensure that the benefits of development reach the backward, the poor and those from rural areas. As Thomas Jefferson said, “The purpose of government is to enable the people of a nation to live in safety and happiness. Government exists for the interests of the governed not for the governors.”