India’s economy is firmly in the middle of a V-shaped recovery and will bounce back to record 11% growth in 2021-22 after an estimated 7.7% contraction this year, according to a ‘conservative’ estimate in the Economic Survey for 2020-21. The annual birds’ eye view of the economy strongly emphasized the need for the government to loosen its purse strings to aid the recovery without getting overly concerned about the fiscal deficit.
The survey compared data from countries and across Indian states to argue that the primary focus at India’s stage of development must be on promoting economic growth rather than reducing inequality. Growth, it said, had a “far greater effect on poverty alleviation than inequality” while adding that “redistribution is only possible in a developing economy if the size of the economic pie grows”.
While calling for regulation of the health sector, the survey maintained that overall the Indian economy had been adversely affected by too much regulation. Complex regulation that aimed to anticipate every possible situation rather than light supervision was the bane of India, it asserted.
The survey cautioned about the elevated stock prices. “While stock markets value the potential future growth, these elevated levels still raise concerns on the disconnect between the financial markets and real sector,” it said.
The two volumes of the nearly 900-page survey had a smattering of references from cricket (India’s 36 all out and the subsequent V shape recovery in Australia), Bollywood (Amitabh Bachhan starrer Main Azad Hoon) and ancient wisdom scattered over a wealth of charts and graphs that sought to drive home each point with data.
One of the few areas in which the survey expressed concern at India’s performance was inadequate R&D spending, in comparison with other large economies. “This points to the need for India’s business sector to significantly ramp up investments in R&D,” the survey stressed, saying “India’s aspiration must be to compete on innovation with the top ten economies”. While India’s absolute growth numbers may be remarkable in 2021-22 due to the low base effect.