Key Highlights of Economic Survey 2021

State of economy amidst once in a century crisis:

* Economic contraction projected at 7.7 pc in FY21 * 11 pc GDP growth projected in FY22, farm sector remains silver lining * V-shaped recovery supported by COVID vaccination drive * Rebound to be led by low base and continued normalization in economic activities as vaccine rollout gathers traction * Govt consumption, net exports have cushioned growth from further diving down * Exports to decline by 5.8 pc, imports by 11.3 pc in 2nd half of FY21 * India expected to have a Current Account Surplus of 2 pc of GDP this fiscal, a historic high after 17 years * India’s sovereign credit ratings do not reflect its fundamentals, India’s willingness to pay is unquestionably demonstrated through its zero sovereign default history * India’s fiscal policy should reflect Gurudev Rabindranath Tagore’s sentiment of ‘a mind without fear’

Healthcare: * India”s lockdown strategy prevented 37 lakh COVID-19 cases, 1 lakh deaths * Survey recommends increase in public healthcare spending from 1 pc to 2.5-3 pc of GDP

Even without lockdown pandemic would have created significant economic impact: CEA

* India’s health infrastructure must be agile to respond to pandemics – healthcare policy must not become beholden to ”saliency bias” * Telemedicine needs to be harnessed to the fullest by investing in internet connectivity and health infrastructure

Process reforms: * India over-regulates the economy resulting in regulations being ineffective even with relatively good compliance with process * The solution is to simplify regulations and invest in greater supervision which, by definition, implies greater discretion * India’s business sector needs to significantly ramp up investments in R&D

* Survey suggests asset quality review exercise immediately after the forbearance is withdrawn * Forbearance represents ”emergency medicine” that should be discontinued at the first opportunity when the economy exhibits recovery, not a ”staple diet” that gets continued for years * Legal infrastructure for the recovery of loans needs to be strengthened de facto

Fiscal Developments * India adopted a calibrated approach best suited for a resilient recovery of its economy from COVID-19 pandemic impact, in contrast with a front-loaded large stimulus package adopted by many countries * India remained a preferred investment destination with FDI pouring in amidst global asset shifts towards equities and prospects of quicker recovery in emerging economies * Net FPI inflows recorded an all-time monthly high of USD 9.8 billion in November 2020, as investors’ risk appetite returned * India only country among emerging markets to receive equity FII inflows in 2020 * India the fastest country to roll out 10 lakh vaccines in 6 days and also emerged as a leading supplier of the vaccine to neighbouring countries and Brazil * India’s mature policy response provides important lessons for democracies to avoid myopic policy-making.