By Priyanka Saharia, Dr. Prashant Kumar Choudhary*
India releases its economic survey 2021-22 on 31st Jan, 2022 and brings a new dimension to it by adopting agile approach to policy making and tracking development through satellite images and cartography. Survey estimates that India will register real GDP growth rate of 9.2 percent for the fiscal year 2021-22. It predicts that agriculture, industry and service sector is expected to grow by 3.9, 11.8 and 8.2 per cent respectively which were 3.6, -7.0 and -8.4 per cent in 2020-21. It further predicts India will witness a real GDP growth rate of 8-8.5 percent in FY23’ which is below the prediction of World Bank (8.7%) and International Monetary Fund (9%).
Economic survey 2021-22 mentions that most of the macroeconomic indicators are strong. India’s foreign exchange reserves remained unaffected by COVID-19. According to RBI, on 31st December, 2021 foreign exchange reserve pegs at $634bn which is more than sufficient for merchandise imports for next 13 months. Country’s CPI inflation stands at 5.6 per cent Y-o-Y in December 2021 which is under tolerable band. Annual real growth in demand side of GDP and its components are also expected to recover from pandemic. Total consumption and gross fixed capital formation are expected to rise up to 7.0 percent (from -7.3 per cent of the year 2020-21), and 15.0 (from -10.8 per cent for the year 2020-21) respectively. India’s gross fiscal deficit as a percentage of GDP remains a matter of concern and it is as high as 10 percentage of GDP which is 2 percentages higher than the period of global financial crisis, 2008.
Recovery from pandemic is also reflected in terms of higher tax collection including both direct and indirect taxes from April to November, 2021. State has collected 7 lac crores (in INR) direct tax and 8.2 lac crore indirect tax which is way higher than the 4.3 lac crore direct tax and 5.9 lac crore indirect tax in previous year’s quarter of the same period.
As the macroeconomic indicator shows strong sign of economic recovery and is reaching the pre-pandemic level, India is still falling short of 12% than the real GDP growth rate if the pandemic was not there. Economic recovery of 2021-22 is subject to the base. Indian economy is recovering but from a low base of pandemic. Manufacturing growth has also touched a bit above pre pandemic level but it is falling short of 24% than the normal growth.
Economic survey 2021-22 also states that government’s spending on social services has increased significantly during pandemic but expenditure on social services as a percentage to GDP in education sector witnessed a jump by very small margin i.e., 2.8 percent to 3.1 percent. Learning loss of students due to pandemic has become a major challenge in education in India, especially for children from marginalized communities. To protect students from COVID-19, schools and colleges were closed repeatedly in the last two years. Online learning became most prominent and safest mode of learning. However, huge digital divide created hurdles for students to have access to education. Two years of discontinuity in education, India might witness a sharp increase in dropout rate and gender gap in Indian schools and colleges. However, recovery from these challenges remains unknown as Economic survey 2021-22 covers only pre-pandemic data till 2019-20. To bridge the gap and compensate this loss, India should increase its spending on education and create active awareness program to bring children back to schools.
Economic survey 2021-22 shows that as per the periodic labor force survey data up to March 2021, employment affected by COVID-19 in urban sector has recovered to pre-pandemic level. To provide necessary safety net to rural unorganized labor, allocation of funds to MNREGA has also increased. However, recent CMIE data has shown in December, 2021 unemployment rate touches four month high with 7.91 percentages (urban unemployment -9.30%, rural unemployment- 7.28%). In January, 2022 unemployment rate has fallen to 6.57 but urban unemployment rate is higher than rural unemployment rate (urban unemployment rate 8.16 %, rural unemployment rate 5.84 %). Unemployment rate was all time high in May, 2021 with 11.84% (urban unemployment rate 14.72 percent and rural unemployment 10.55 percent).
One of the biggest concerns which stems from the survey is, whether this projected growth is tenable during the pandemic knowing the fact that it is not over yet. As it seems, the economy might need some months to recover fully from its impact on a condition that new variant of Corona does not force another economy standstill. The expected growth might depend much on whether market is ready to invest more during pandemic and people have the buying capacity. We have already witnessed that during the pandemic, several companies’ (manufacturing, services etc.) sales went down drastically which resulted into layoffs of employees and that contributed to high unemployment in the country. The market needs to show confidence in the measures taken up the government such as Credit guarantee scheme for MSME sectors or PLI schemes for 13 key sectors so as to invest more to achieve the projected growth by the government. Additionally, banking sector is also showing signs of recovery as several of its indicators have increased positively in the months of April-November, 2021 such as bank credit growth (Y-o-Y), capital adequacy ratio etc. However, these indicators should be able to help the companies to get the loans from the banks and in turn invest back in the market.
The biggest worry however for the government would be to handle the rising unemployment issue exacerbated due to pandemic which hardly hit all the sectors and forced people to migrate back to their villages. According to several sources, there in definite strong rise of unemployed people in absolute numbers. It is pertinent for the government to deal with rising unemployment issue starting with filling up lacs of vacant posts in public sector such as railways, SSC, universities etc. This might help to the economy in the long run it would increase the purchasing power of the consumers, as essential factor to drive the economic growth of the country.
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*Priyanka Saharia is Ph.D. Scholar, Centre for Economic Studies and Policy, Institute for Social and Economic Change (ISEC), Bangalore; Dr. Prashant Kumar Choudhary is Assistant Professor, Department of Political Science, Kumaraguru College of Liberal Arts and Science, Coimbatore
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