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Budget 2022: Economic Survey and Its Highlights

01 February 2022

The Union Finance Minister Nirmala Sitharaman presented India’s economic outcome for 2022 in the Parliament on 31st January 2022. As per tradition, this report is released ahead of the Union Budget to be presented on 1st February. And it sets the tone for the Budget. The survey details the estimations for the economic performance of the country in the past year.

Let’s take a quick look at the key findings from the report.

GDP update

As per the Economic Survey 2022, the real GDP rate for FY21-22 is expected to be recorded at 9.2%. The estimated rate for the next fiscal, FY22-23, however, has been brought down to 8-8.5%. Nonetheless, the report states that a steady economic growth shall be achieved via reforms on the supply side. This will be managed by widespread coverage of vaccines, ease in regulations, and promotion of exports.

Forex reserve build-up

India moved to be the 4th largest holder of foreign exchange reserves. India’s forex currently stands at a strong $634 billion, as on 31st December 2021. This was a significant improvement from being among the ‘fragile five’ nations’ in terms of forex about a decade ago. The shift was a result of a positive Balance of Payments over the past two years, allowing RBI to build up the reserve. 

Improvement in consumption

The total consumption during FY22 has been estimated to have grown at 7%. A good chunk of this has been through Government spendings, as per the report. There has also been a strong revival in Government revenues, with the revenue receipts having grown at the fastest pace in the current financial year as compared to the previous two years. This has given the Government enough scope to extend more support if needed, the Finance Minister said. 

Further, there has been an increase of 23.2% YoY in the revenue from excise duty. This was recorded even after a cut in fuel taxes announced in November 2021. There has been an overall increase in both tax and non-tax revenue. 

Disinvestment 

A major topic of discussion that was looked forward to was disinvestment. However, the Government mentioned only the particular importance of the sale of Air India to the Tata Group as a part of its disinvestment strategy. The LIC IPO is anyway one of the biggest news to look forward to in the year.

Demand recovery

As compared to the pre-pandemic level, there has been immense recovery in the demand side. A majority of this can be gauged through a boost in exports, increased government spending, as well as gross fixed capital formation. As per the survey, the increase in gross fixed capital formation indicated higher levels of investment in FY21-22. Investment levels are estimated to grow at 15% during FY21-22. 

Sectoral growth 

Agriculture 

Looking at the sector wise performance, the agriculture sector has been the least affected by the pandemic. It showed growth of 3.9% YoY. In addition to this, the Economic Survey talked about providing small holding farm technologies to improve the productivity of small and marginal farmers. Moreover, it was put forward that priority will be given to crop diversification into oilseeds, horticulture, and pulses. 

Industrial sector

This financial year, the industrial sector showed a massive rebound at a whopping 11.8% expansion post contracting by 7% in the previous financial year. Its subsectors, including manufacturing, mining, and construction have shown a similar performance. The industrial sector now accounts for 28.2% of the GVA. 

Finance services

The pandemic did not impact performance of this sector. In fact, there has been a decline in both gross and net NPAs, signalling better capitalisation. 

Amid restrictions and curfews, the most massive impact of the pandemic has been on the service sector. However, after experiencing a contraction by 8.4% in FY20-21, it is estimated to expand at 8.2% during FY21-22. 

The survey also emphasised on the Government’s Barbell Strategy that provided a safety net for the vulnerable sections. 

Start-up

The survey praised the boost in IPOs, which reflected the growth of the primary market. There were 75 IPOs in 2021, between the months of April and November. A total of Rs. 89,066 crore was raised by the firms via the initial offers. This broke a decade-long record, showing an over-the-top performance. There has been a major push to the start-up culture in the country. Moreover, India has climbed 35 ranks to stand at the 46th position in the Global Innovation Index. However, the expenditure on research and development remained low.

Strategy going ahead

The Government has planned a four-pillared strategy to get the economy ready for the post-pandemic life. One of the four pillars is short-term economic support. The other three include fiscal stability in the medium-term, structural and supply-side reforms, and process reforms. Moreover, an investment of $1.5 trillion in the infrastructure sector has been projected. This shall not only improve the quality of life of the people but also push the country to reach the goal of a $5 trillion economy by FY24-25.  

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