Why in the news ?

• The pre-Budget Economic Survey tabled in parliament predicts that India's GDP growth will accelerate from 6.75% this year to 7-7.5% in 2019.

• The government has made progress in providing citizens with bank accounts, cooking gas, housing, power and toilets—a major part of its policy plank to wean households away from subsidies, according to the Economic Survey 2017-2018.
• Inclusion and empowerment have been two key policy priorities of the government, which has been aiming to cut doles and subsidies and deliver benefits directly to the needy through the use of the internet and other technologies.

Impact of GST and demonetisation

• According to the survey, India will recover from the double whammy of demonetisation and goods and services tax (GST) glitches, enjoy an export surge arising from the global economic boom, and reap the fruits of reforms to resolve the twin balance sheet (TBS) problem of overleveraged banks and companies.
• Demonetisation and implementation of Goods and Services Tax (GST) have resulted in “a substantial increase” in the number of new taxpayers in the country, Economic Survey said. 
• The number of indirect tax payers has shot up by a whopping 50% after GST. This portends well for tax compliance and revenue growth.
• New income tax filers are up 10.1 million since demonetisation, against an annual average rise of 6.2 million in the previous two years. 

Employment

• The Economic Survey said the government will push ahead with labour reforms, increase spending on infrastructure and create an enabling environment for labour-intensive sectors to boost job creation, which it termed as a pressing medium-term challenge.
• The Survey reiterated the government’s commitment to consolidate a plenty of labour laws into four broad pieces of legislation and adopt technology to ease compliance norms for companies.
• Around 12 million people enter the Indian labour market every year. The Survey says that India’s formal workforce strength may be greater than estimated.

Infrastructure

• According to the survey, India will require investments of about $4.5 trillion by 2040 to develop infrastructure to improve economic growth and community well­being.
• The current trend shows that India can meet around $3.9 trillion infrastructure investment out of $4.5 trillion.
• The cumulative figure for India’s infrastructure investment gap would be around $526 billion by 2040.
• The need of the hour is to fill the infrastructure investment gap with financing from private investment and institutions dedicated to infrastructure financing.
• The Survey pointed out that there was scope for developing the shipbuilding industry, currently dominated by South Korea, China and Japan, in India. This will not only create a strong manufacturing base but also generate millions of jobs.

Climate change and farm income

• The Economic Survey 2017­ 18, said farmer income losses from climate change could be between 15% and 18% on an average, rising to anywhere between 20%­-25% in unirrigated areas of the country.
• Survey added that India needed to expand irrigation – and do so against a backdrop of rising water scarcity and depleting groundwater resource
• As per the survey, In the 1960s, less than 20% of agriculture was irrigated, now this number is in the mid­40s.
• The Indo-­Gangetic plain, and parts of Gujarat and Madhya Pradesh are well irrigated. But parts of Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, Chhattisgarh and Jharkhand are still extremely vulnerable to climate change on account of not being well irrigated.
• Technologies of drip irrigation, sprinklers and water management — captured in the “more crop for every drop” campaign — may well hold the key to future Indian agriculture,” said the Survey.
• It further says that power subsidy needs to be replaced by direct benefit transfers so that power use can be fully costed and water conservation furthered. 

Feminisation of farm sector

• As men migrating from urban to rural areas, there is ‘feminisation’ of agriculture sector, as the number of women in multiple roles such as cultivators, entrepreneurs and labourers is increasing, according to the Economic Survey.
• The Survey also stressed the need for an ‘inclusive transformative agricultural policy’, aimed at gender ­specific interventions.
• “Rural women are responsible for the integrated management and use of diverse natural resources to meet the daily household needs. This requires that women farmers should have enhanced access to resources like land, water, credit, technology and training which warrants critical analysis in the context of India,” it added.
• The Survey observed that crucial role of women in agricultural development and allied fields was a fact long taken for granted.

Open defecation free

• The number of people defecating in the open in rural India had reduced to less than half of what it was in 2014, according to the Survey, claiming success in rural sanitation due to Swachh Bharat Mission (SBM), the flagship scheme of the Centre.
• So far, 296 districts and 3,07,349 villages all over the India have been declared as Open Defecation Free (ODF).
• As per baseline survey conducted by Ministry of Drinking Water and Sanitation, the number of persons defecating in open in rural areas, which was 55­crore in October, 2014, declined to 25­crore in January, 2018, at a much faster pace compared to the trend observed before 2014,” the Survey said.
• Eight States and two Union Territories, i.e., Sikkim, Himachal Pradesh, Kerala, Haryana, Uttarakhand, Chhattisgarh, Arunachal Pradesh, Gujarat, Daman & Diu and Chandigarh have been declared as ODF completely.
• More than 90% of the individuals, who had access to toilets, were using them in 2016 and 2017.
• The Survey also says that there are economic benefits in becoming open­ defecation free, as according to the World Bank estimates, the lack of sanitation facilities costs India over 6% of GDP. In a report ‘The Financial and Economic Impact of SBM in India (2017)’ UNICEF estimated that a household in an ODF village in rural India saves Rs 50,000 ($800) every year.

Research and development (R&D)

• India currently spends far below its economic capacity on research, according to the Survey. India spent only 0.5% of its Gross Domestic Product (GDP) on research and development in 2015.
• In comparison, China and the U.S. spent 1% and 2.5%, when their per capita GDP were similar to that of India.
• In the last two decades, India had improved its output of scientific publications and was currently sixth in the world. However, in quality, India was still woefully short.
• For instance, in 2001, China had 174 high quality scientific publications and India 103. By 2011, China had soared ahead at 980 and India was still only at 153.
• The Survey also proposed missions in mathematics as well as genomics.

Renewable Energy sector

• According to the survey, government needs to revisit subsidies and incentives for renewables because its tariff is approaching grid parity and some discoms are insisting for renegotiation of already inked PPAs.
• The Survey also suggested setting up a payment guarantee fund or a foreign exchange fund for renewable developers to reduce risks along with affordable financing.

Saving slowdown

• The Survey raised concerns over slowdown in savings saying that too was ongoing. However, investment slowdown was more detrimental to growth than savings slowdown.

Reforms

• Looking ahead, it said reform measures like the implementation of the Insolvency and Bankruptcy Code and the recapitalisation plan for public sector banks would go a long way in addressing the twin balance sheet problem afflicting both corporates and banks, which would in turn further boost economic growth.

Cautions and way ahead

• The Survey did caution about some ongoing trends -such as rising oil prices and stock market prices -that would require vigilance and preventive action.
• The chief economic adviser said that a $10 per barrel increase in oil prices results in a slowdown in GDP growth by 0.2-­0.4%, and a rise in inflation of 0.3-­0.4%.
• The survey pointed out that apart from addressing these risks, the government has several policy actions to take in the next financial year.
• These include completing the reforms needed to effectively address the ailing balance sheets of corporates and banks, and finalising the privatisation of Air India.
• In the medium term, the Survey highlighted three areas that would require a policy focus including employment, education, and agriculture.
• The Economic Survey has suggested that the Goods and Services Tax (GST) Council should comprehensively review ‘embedded taxes’ and expeditiously eliminate the embedded export taxes to boost India’s manufacturing exports.
• Pointing out that high cost of logistics was impacting competitiveness in domestic and global market, it suggested the formulation of a National Integrated Logistics Policy to bring in greater transparency and enhance efficiency in logistics operations.
• The government needs to address issues such as rent control and unclear property rights rather than focussing on building more homes under its scheme to provide ‘Housing for All’ by 2022, according to the Economic Survey.
• A successful housing policy should enable the ability to move to, between and within cities as job opportunities arise.

Source

·         The Hindu, Indian Express and The Mint.