This year’s annual pre-budget economic survey, prepared by chief economic adviser Sanjeev Sanyal, first highlighted India’s flexible policy response to the Covid-19 shock.
The “agile” framework is based on feedback loops and real-time monitoring of actual results, as opposed to the traditional “waterfall” strategy that introduces a pre-stimulus package. Agile methods are aided by 80 high frequency indicators (HFIs) for today’s extremely uncertain environment.
According to Sanyal, the survey reverted to a single-volume format after eight years as the two-volume format “became unwieldy.”
Economic survey forecasts India’s GDP to grow by 8-8.5% next fiscal year on the back of broad vaccine coverage, gains from supply-side reforms, strong export growth and fiscal capacity to increase capital spending if needed . The forecast is lower than the 9% forecast by the International Monetary Fund.
The survey noted that vaccination should not be seen as merely a health response, but as a current macroeconomic indicator.
The GDP forecast is based on assumptions that there will be no further weakening of the pandemic-related economic disruptions, that the monsoons will be normal, that the withdrawal of global liquidity by major central banks will be largely orderly, that global supply chain disruptions will steadily ease throughout the year and that oil prices will In the range of $70-75 per barrel.
While the first four assumptions seem plausible, the fifth assumption on oil prices seems promising as analysts expect Brent to average around $80 a barrel this year or even higher due to geopolitical risks in Eastern Europe .
Brent crude topped $90 last week for the first time since 2014 and could rise to $120 in the coming months.
However, the economic survey does suggest that India needs to be wary of imported inflation, especially rising global energy prices.
Interestingly, the Economic Survey uses satellite imagery to highlight India’s infrastructure development. For example, satellite photos of nighttime brightness between 2012 and 2021 show the expansion of electricity supply, economic activity and urban sprawl. Other images show the extent of urban sprawl in some parts of cities such as Gurugram, Bengaluru and Mumbai. (4 pictures below)
The survey acknowledged that India’s economic response to the pandemic has placed more emphasis on supply-side reforms than demand-side reforms. Some of these include production-linked incentive schemes, removal of retroactive taxes, relaxation of guidelines for the BPO sector, telecom sector reform and revision of the definition of MSME.
Whether the budget will offer measures to stimulate demand, such as cuts to income or fuel taxes and increased income tax relief, will be announced in a few hours.
Complete News Source : Business Standard
