India’s economic growth is expected to “strongly rebound” to 6-6.5 per cent in 2020-21 from 5 per cent estimated in the current fiscal, the Economic Survey said on January 31, adding that the government with a strong mandate has the capacity to expedite reforms.

The Economic Survey 2019-20 tabled in Parliament 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.

The government’s thrust on affordable housing, Make in India, reduction in corporate tax rate and improvement in ease of doing business, besides other factors, will help in boosting economic growth, it said.

However, it has also cautioned that continued global trade problems, escalation in US-Iran geopolitical tensions and weak economic recovery in advanced economies are the downside risk that have the potential to drag down growth.

“On a net assessment, it appears that the upside risks should prevail, particularly when the government with a strong mandate has the capacity to deliver expeditiously on reforms. GDP growth should strongly rebound in 2020-21 and more so on a low statistical base of 5 per cent growth in 2019-20,” said the Survey tabled by Finance Minister Nirmala Sitharaman.

On a net assessment of both the downside / upside risks, it said, “India’s GDP growth is expected to grow in the range of 6 to 6.5 per cent in 2020-21.”

On the 2019-20 GDP, it said the estimate of 5 per cent growth suggests an uptick in expansion in the second half of 2019-20.

The Survey said that the uptick in the second half of 2019-20 would be mainly due to 10 positive factors like picking up of Nifty India Consumption Index for the first time this year, an upbeat secondary market, higher FDI flows, build-up of demand pressure, positive outlook for rural consumption, rebound of industrial activity, steady improvement in manufacturing, growth in merchandise exports, higher build-up of foreign exchange reserves and positive growth rate of GST revenue collection.

The document also emphasised that merger of public sector banks may increase the financial strength of the merged entities, lower risk aversion and result in lower lending rates.

Further, as the implementation of GST further settles down, the increased unification of the domestic market may reduce business costs and facilitate fresh investment.

Reforms in land and labour market may further reduce business costs, said the Survey.

Infrastructure push

To spur economic growth and achieve the $5 trillion economy target, India needs to spend about $1.4 trillion on infrastructure during 2020-25, the Survey said.

Investment in infrastructure is necessary for the economy, as power shortages, inadequate transport and poor connectivity affects overall growth performance, as per the Survey.

“To achieve GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure so that lack of infrastructure does not become a constraint to economic growth. The National Infrastructure Pipeline (NIP) is expected to enable infrastructure projects that will create jobs, improve ease of living and provide equitable access for infrastructure for all, thereby making growth more inclusive,” the Survey said.

As per the NIP, the central government (39 per cent) and state government (39 per cent) are expected to have equal share of funding of the projects followed by the private sector (22 per cent). Projects worth Rs 42.7 lakh crore are under implementation.

The Survey noted that road transport is the dominant mode of transportation. In 2017-18, the transport sector’s share in the Gross Value Added (GVA) was about 4.77 per cent, of which the share of road transport is 3.06 per cent, followed by Railways (0.75 per cent), air transport (0.15 per cent) and water transport (0.06 per cent).

Total investment in the roads and highways sector has gone up more than three times in the five-year period of 2014-15 to 2018-19, it said.

The Survey marked that during 2018-19, the Indian Railways carried 120 crore tonnes of freight and 840 crore passengers, making it the world’s largest passenger carrier and fourth largest freight carrier.

Taking a comprehensive view of civil aviation, the Survey observed that India has 136 commercially managed airports by the Airports Authority of India and six under public private partnerships for operation, maintenance and development of airports.

A total 43 airports are up and running since the scheme for operationalising unserved airports was taken up.

To ease the strain on existing airport capacities, 100 more airports are to be made operational by 2023-24, the Survey said. To continue with the high growth trajectory, the government has been providing a congenial environment so that Indian carriers double their fleet from about 680 planes at the close of 2019 to 1,200 by 2023-24.

About the shipping sector, the Survey stated that around 95 per cent of India’s trade by volume and 68 per cent in terms of value is transported by sea. As on September 30, 2019, India had a fleet strength of 1,419 ships.

The major ports in the country have an installed capacity of 1,514.09 million tonnes (MT) per annum as on March 2019 and handled traffic of 699.09 MT during 2018-19.

The Survey said the shipping ministry is striving to improve operational efficiencies through mechanisation, digitisation and process simplification. The average turnaround time in 2018 improved to 59.51 hours as against 64.43 hours in 2017-18.

The Survey said universal electrification progress has been made in generation and transmission of electricity. The installed capacity has increased from 3,56,100 MW in March 2019 to 3,64,960 MW in October 2019.

The Survey underlined that access to electricity is necessary for making growth inclusive and for promoting ease of living.

The Pradhan Mantri Sahaj Bijli Har Ghar Yojana (SAUBHAGYA) was launched on September 25, 2017, with an outlay of Rs 16,320 crore to achieve universal household electrification by providing last-mile connectivity by March 31, 2019.

On the mining sector, it said there has been a notable turnaround in mineral production because of policy reforms and production of major minerals during 2018-19 has recorded a growth of 25 per cent when compared to last year in terms of value.

While giving an overview of the construction sector, the Survey said it accounts for 8.24 per cent of the GDP, which includes housing and employs about 12 per cent of the workforce.

The Pradhan Mantri Awaas Yojana-Urban (PMAY-U) launched in June 2015, the Survey said, is one of the largest housing schemes of the world covering entire urban India and is being implemented through four verticals.

The scheme is moving towards achieving the vision of a “pucca” house to every household by 2020, it said, adding that 32 lakh houses have been completed and delivered.

The Survey noted that since the launch of the Smart City Mission in 100 cities, 5,151 projects worth more than Rs 2 lakh crore are at various stages of implementation and added a total of 1,290 projects worth Rs 22,569 crore have been completed and are operational.

Highlights

* GDP growth pegged at 6-6.5 per cent in fiscal year starting April 1, up from 5 per cent in current fiscal.

* Fiscal deficit target for the current fiscal may need to be relaxed to revive growth.

* Uptick in growth projected in second half of current fiscal based on 10 factors including higher FDI flows, build-up of demand pressure, positive GST revenue growth.

* Survey asks government to deliver expeditiously on reforms to revive growth.

* Ethical wealth creation key to India becoming $5 trillion economy by 2025.

* Share of formal employment increased from 17.9 per cent in 2011-12 to 22.8 per cent in 2017-18, reflecting formalisation in the economy.

* Theme of Survey is wealth creation, promotion of pro-business policies, strengthening of trust in the economy.

* To achieve GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure.

* 2.62 crore new jobs created in rural and urban areas between 2011-12 and 2017-18 among regular wage / salaried employees.

* 8 per cent increase in regular employment of women in 2017-18 over 2011-12.

* Excessive government intervention in markets, especially when the market can do the job of enhancing citizens’ welfare perfectly well, stifles economic freedom.

* Debt waivers disrupt the credit culture, reduces formal credit to some farmers.

* Suggests government to systematically examine areas where it needlessly intervenes and undermines markets.

* Calls for improving governance in public sector banks, more disclosures to build trust.

* Calls for measures to make it easier to start a new business, register property, pay taxes, enforce contracts.

* Easing of crude prices lowers current account deficit; imports contract more sharply than exports in the first half of current fiscal.

* Declining inflation from 3.2 per cent in April 2019 to 2.6 per cent in December 2019, reflecting weakening demand pressure in the economy.

* GST collections grew by 4.1 per cent for the Centre during April-November 2019.

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