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Economic Survey 2019 outlines vision to achieve $5-trn economy: PM Modi

The Eco Survey analyses the trends in agricultural and industrial production, infrastructure, employment, money supply, prices, imports, exports, foreign exchange reserves ahead of Union Budget 2019

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The expansion in the economy will be driven by investment and consumption | Photo: Shutterstock

India's economic growth, which is expected to rebound from a five-year low to 7 per cent this year, now needs to shift gears to accelerate and sustain a higher growth rate to become a $5-trillion economy by 2024-25, the pre-Budget Economic Survey said Thursday.

Investment rate, which was been declining from 2011-12, seems to have bottomed out, and is expected to pick up in consumer demand and bank lending.

However, economic slowdown impacting tax collections and rising state expenditure on farm sector may put strains on the fiscal front, the survey presented in Parliament by Finance Minister Nirmala Sitharaman said.

The real gross domestic product (GDP) growth, which slowed to a five-year low of 5.8 per cent in the first three months of 2019 - well below China's 6.4 per cent - is expected to rise to 7 per cent in the fiscal year 2019-20 that started in April.

GDP growth was 6.8 per cent in the previous 2018-19 fiscal year, down from 7.2 per cent in 2017-18.

The expansion in the economy will be driven by investment and consumption, with political stability auguring well for the growth prospects, it said adding that the upside and downside risks to growth are evenly balanced with monsoon rainfall seen tipping the scales.

But for India to become a $5-trillion economy - more than double the current size - by 2024-25, it needs to sustain a real GDP growth rate of 8 per cent, which international experience suggests is possible only through a sustained "virtuous cycle" of savings, investment and exports.


"The political stability in the country should push the animal spirits of the economy, while the higher capacity utilisation and an uptick in business expectations should increase investment activity in 2019-20," the survey said.

Authored by Chief Economic Adviser Krishnamurthy Subramanian, the survey stated that investment (especially private) is the 'key driver' that boosts demand, creates capacity, increases labour productivity, introduces new technology, allows creative destruction and generates jobs.

Oil prices, the Economic Survey 2018-19 said, will decline in current fiscal, pushing consumption.

Consumption accounts for about 60 per cent of the GDP.

"However, downside risks to consumption remain. The extent of recovery in the farm sector and farm prices will decide the push to rural consumption, which is also dependent on the situation of monsoon," it said adding that some regions are expected to receive less than normal rains, which could prove to be detrimental for crop production.

"If the impact of stress in the non-banking financial company (NBFC) sector spills over to this year as well, it may lead to lower credit offtake from NBFCs, which may dampen growth in consumption spending," it said.


The survey suggested policies to unshackle micro, small and medium enterprises (MSMEs) to grow, create jobs and enhance productivity. It also called for reorienting policies to promote young firms which have the potential to become big, rather than MSME firms which remain small.

The survey flagged the need to prepare for the ageing of the population, necessitating more healthcare investment and raising the retirement age in a phased manner.

Highlighting the immense potential of data of societal interest, the survey said data should be "of the people, by the people, for the people".

Stating that low pay and wage inequality remain serious obstacles towards achieving inclusive growth, it called for legal reforms, policy consistency, efficient labour markets and use of technology focus areas.

Contract enforcement, it said, remains the biggest constraint to improving Ease of Doing Business ranking.
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Key points in the Economic Survey

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There is a need to address the "burgeoning food subsidy bill" in order to sustain the government's food security programme for the poor, the Economic Survey said.

The government, in its interim budget presented in February, had pegged food subsidy bill at Rs 1,84,220 crore for 2019-20 as against Rs 1,71,298 crore last year.

"For sustainability of food security operations, the issue of burgeoning food subsidy bill needs to be addressed. ...The rationalisation of food subsidy and greater use of technology in food management will ensure food security for all," the survey, presented in Parliament, said.

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Filling existing judicial vacancies and improving productivity improvements in courts can address key hurdle of delays in contract enforcement and dispute resolution: CEA Subramanian
 
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Inflation rate has moved to a more stable and low level in the last five fiscals: Survey

The country's inflation rate has moved to a more stable and low level in the last five fiscals, and controlling price surge remains a key policy focus area of the government, the Economic Survey for 2018-19 said
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Classical economics thinks of humans as robots; the economic survey argues for an ambitious agenda for social change, treating humans as humans, relying on the lessons offered by Behavioural Economics: CEA Krishnamurthy Subramanian
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Favourable demographics a major plus point: CEA

Favourable demographics is a major plus point for India to adopt a virtuous circle 
 
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India should learn from China: CEA

As their economy started growing better, China started saving and investing more; India needs to learn from this and adopt a virtuous cycle: CEA Krishnamurthy Subramanian
 
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Data as a public good can enhance the quality of people's lives, says CEA Krishnamurty Subramanian
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Indian economy is poised for a take off, says CEA Krishnamurty Subramanian
 
 
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Topics : Economic Survey Union Budget 2019 Union Budget pre-Budget Economic Survey Chief Economic Advisor budget 2019 Krishnamurthy Subramanian CEA Krishnamurthy Subramanian

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First Published: Jul 04 2019 | 11:23 AM IST

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