what the survey says

• Economic Survey 2021-22 focuses on the post-pandemic recovery, noting the availability of fiscal space for the government, and analyses a range of aspects including inflation, energy prices and global uncertainties.
• It has also taken stock of growing revenues to indicate the availability of fiscal space, should the government see the need to provide additional support.
• The Survey has noted that growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and the availability of fiscal space to ramp up capital spending.

Key highlights

• Fiscal space: Stressing the need to continue the focus on capital expenditure, the survey has indicated that the government is on course to achieve the fiscal deficit target of 6.8% of GDP for the current year.
• The Survey also argues that the banking sector is well placed to support the economy, as it is now “well capitalised and the overhang of Non-Performing Assets seems to have structurally declined”.
• Vaccine economics: The Survey says the progress of vaccination should be seen not just as a health response indicator, but also as a buffer against economic disruptions caused by repeated pandemic waves.
• Inflation pressures: The Survey flags inflation as an issue. It has noted in particular that while India’s CPI inflation — 5.2% in 2021-22 (April-December) — is within the targeted tolerance band, WPI inflation has been running in double digits.
• This is partly due to base effects; however, “India does need to be wary of imported inflation, especially from elevated global energy prices”.
• Global uncertainty: The biggest downside risk comes from the pandemic, it says, along with longer port delays, higher freight rates, and the shortage of shipping containers and inputs such as semiconductors. Supply-side disruptions, exacerbated by recovery in demand, pose significant risks for global trade.
• Energy risks: The report calls for a “diversified mix of sources of energy of which fossil fuels are an important part”, but simultaneously calls for focus on building storage for intermittent electricity generation from solar PV and wind farms to ensure on-demand energy supply.
• Supply side reforms: It calls for emphasis on developing a supply-side strategy to deal with the long-term unpredictability of the post-Covid world, emanating mainly from factors such as changes in consumer behaviour, technological developments, geopolitics, climate change, and their potentially unpredictable interactions.
• Industrial growth: As per the survey The industrial sector, which suffered due to pandemic disruptions, is likely to record a growth of 11.8% in 2021-22.
• Public spending: During April-November 2021, capital expenditure grew by 13.5% (YoY), with focus in infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs.
• The increase was particularly substantial given the high YoY growth in capital expenditure registered during the corresponding period of the previous year as well.

Way forward

• Basis the macro-economic stability indicators, the Survey believes that the Indian economy is “well placed” to take on the challenges of 2022-23.
• The Survey proposes use of the Agile approach to policymaking with 80 high-frequency indicators in an environment of “extreme uncertainty”.
• The approach, used in project management and technology development, assesses outcomes in short iterations while constantly making incremental adjustments.