The highly anticipated Union Budget for the fiscal year 2020-21 is set to be released by the Hon’ble Finance Minister Nirmala Sitharaman on 1st February 2020. Prior to this, an economic survey was released by the Chief Economic Advisor of India, which summarised the performance of India in 2018-19, showed effects of the previous budget, as well as areas of improvement. It also serves as a guide to the general public regarding expectations they can have for the upcoming budget, and projected measures to be undertaken by the Department of Finance to ensure high and sustainable growth of India.
Let’s understand about it in detail :-
In this article
What Is The Economic Survey
Economic Survey is the official survey report of India’s economy. This report is presented usually a day before the Union Budget and provides a detailed look into the country’s economy, its prospects and challenges. It also includes sectoral overviews along with suggestions or reforms.
This survey is vital to understand the future of India’s economy. It helps policymakers to understand the existing policies that need alteration and policies that should be implemented in the near future. It offers an accurate economic forecast with details to explain why the Indian economy will either expand faster or slow down.
Its projection for the next financial year 2020-21 and this year is very significant as it will provide an idea about the direction the country’s economy will take. CSO has released an estimate that FY 2019-20 will see the Indian economy grow by 5% compared to the 7% they predicted earlier.
The Indian government is not bound to follow the suggestions and recommendations of this survey. This survey serves as a policy guide. Previously, the government has comprehensively taken some ideas and rejected some as well. So, this economic survey is not necessarily an outline of the union budget.
The Economic Survey was presented for the first time in 1950 -51 along with the budget and this trend continued till 1964. Since then it has been tabled in the Parliament one day before the budget is presented.
Who Prepares The Economic Survey
The Department of Economic Affairs under the Finance Ministry is aided with preparing the Economic Survey. The government’s Chief Economic Advisor heads and guides this team. The document is then reviewed by the Secretary – Ministry of Finance and is finally approved by the Finance Minister.
( The current CEA is Mr. K Subramanian )
Read More : Budget 2020:What is the Difference Between Direct and Indirect Taxes
Economic Survey 2019-20 – Key Highlights
The economic survey was tabled on 31st January by Finance Minister , Nirmala Sitharaman in the parliament . The survey was prepared by Chief Economic Advisor, Krishnamurthy Subramanian and has two volumes – printed in lavender. The theme for the survey was -” Enable markets, promote ‘pro business’ policies and strengthen ‘trust’ in the economy”. According to the survey, the projected economic growth rate for India will hover around the 6-6% mark in the financial year 2020-2021. The survey also conveyed that the economy has bottomed out. Here are the key highlights :-
- Economy to see a strong turnaround according to the projected figures of 6-6.5% in the next financial year, compared to the 5% estimated in the current fiscal.
- Manufacturing and Global trade slowdown has bottomed out and this will eventually have a positive effect on the growth in the next fiscal.
- Since the need of the hour is to revive economic growth, the current year may see relaxed fiscal deficit targets.
- The survey has put forth the proposal of creating four and eight crore jobs by 2025 and 2030 respectively . The greater vision is to enmesh “ assemble in India for the world” with the Make In India initiative and export country made products. The move is congruent with the vision of making India a $5 trillion economy.
- India needs to bolster infrastructure and remove growth roadblocks such as, power shortages, insufficient transport and poor connectivity, as this has an impact on the growth performance. For this reason , an estimated $1.4 Trillion needs to be spent on infra-projects. Such measures will help India move closer to the goal of becoming an 45 trillion economy in the next five years.
- The survey stated that India balance of payments position saw a marked improvement to US 433.7 billion ( Sept 2019) from USD 412.9 billion of forex reserves ( March 2019) . As on 10th January 2020, the foreign reserves are at USD 461.2 billion.
- India’s debt levels at the end of September 2019, were at 20.1%
- To reach the fiscal deficit target of 3.3. Percent For FY 2020, the government is banking on growth in cumulative GST Collections in October, November and December – the survey said.
- To boost economy further and create more wealth for the nation the government will resort to strategic disinvestment in Central Public Sector Enterprises . The survey estimated freeing up of Rs 33 ,000 crores (leading to an increase in national wealth), by government’s disinvestment of 53.29% in BPCL.
- Pre-budget survey shed light on how the services exports has outraced good export in the recent years which has lead to a steady increase in India’s share in the world’s commercial services export over the decade to reach 3.5 per cent in 2018, which is two times the share in world’s merchandise exports at 1.7 per cent.
- The public issuance of equity and debt from April to December led to an accumulation of Rs 74,000 Crore. This was a whopping 66% more than the last financial year with rights issue being the most preferred way of meeting the financial needs of a business. Rs 44,355 Cr was raised by companies between April and December , 2018-19.
- Vegetarian Thalis have became 29% more affordable than non vegetarian thalis ( 18% more affordable) in the last 13 years.
- When it comes to education, high drop out rates during schooling years and dearth of affordable higher education are huge areas of concern that need immediate addressing. The Survey reiterated that Samagra Shiksha 2018-19 was launched to provide access to education to all as a measure to curb the issue of education discontinuation.
- Foreign tourist arrivals on e-visas increased from 23.69 Lacs in 2018 and stood at 21.75 Lacs in January-October 2019, recording nearly 21 per cent year-on-year growth in the tourism sector.
- India’s mineral output has seen a marked turnaround owing to the reform initiatives by the government.
The significance of this upcoming budget cannot be stressed enough as economists are expecting some crucial reforms in terms of policies and tax structure to boost the economy and keep India on track to become a $5trillion economy by 2024. It would be very interesting to see what’s in store for our country once the budget is announced.
Disclaimer: The views expressed in this post are that of the author and not those of Groww.