The Economic Survey has projected a strong V-shaped recovery with 11 per cent growth in FY22. It is an achievable target, given a lower base owing to the consensus estimate of a 7 per cent-plus contraction in FY21. The Survey has laid out 10 ideas towards achieving and sustaining a higher growth rate, basing it on the theme of wealth creation. A handshake between trust and market forces has been the basis of the 10 ideas.
Concerns around declining corporate loans in non-food credit, importance of improving our perception and score on the corruption index, furthering the ease of doing business have been given prominence as enabling actions to spur growth and employment. The importance of the wealth creators has been highlighted with an interesting presentation on the positive correlation of wealth creation and employee salaries, forex revenues and tax payments. While many of these could be intuitive, calling these out provides cues towards the policy trend of celebrating the honest taxpayer. It is possibly a cue to the finance minister for not imposing any further additional tax burden on wealth creators at the higher end of the income spectrum. Need for entrepreneurship at the grassroots has been highlighted with a quote from popular cinema as an important element for creation of jobs and growth of district GDP that adds up to the national GDP.
During the Chief Economic Advisor’s press conference, in response to a query on whether there was going to be a change in the target year for achieving the $5 trillion economy, he ruled out any change. It will, therefore, be imperative for the economy to grow at a very high growth rate post FY22 on the back of a much smaller base. There are several challenges in getting to and sustaining this high growth trajectory and one of the areas that will be an important consideration is getting into ‘Assemble in India’ and production and export of Network products. Network products are those products that are consumed in the global supply chain – that is, network gear and LED panels. It has been projected that these measures can generate 40 million jobs by 2025 and 80 million by 2030. The production-linked incentive scheme of the government can surely aid this and we may expect budget announcements to give a boost to this scheme possibly through inclusion of more sectors.
Access to credit and finance is another important cog in the wheel of economic growth. The banking sector in India being sub-scale has been highlighted in the Survey. The Survey points out that India has only one bank in the global list of top-100 banks, whereas the size and scale of the economy demands that we should be having six banks in the global top 100. This possibly sends signals to the finance minister towards further bank consolidation exercises to provide scale to the banks. We could, therefore, possibly expect some announcements towards mergers and further divestments of public sector banks.
‘Thalinomics’, highlighting the cost of a thali across various states, which was presented last year, was presented this year as well. The price of a typical thali was presented to have come down with a recent uptick mirroring the high food inflation. While the price of a thali has come down, it will also be interesting to track the ‘Kapdanomics’ and ‘Makanomics’ in the subsequent Surveys given the common person is more concerned about ‘Roti’, ‘Kapda’ and ‘Makan’. Sticky high core inflation keeps putting pressure on the Kapda and Makan elements.
Jobs is what India needs to put us on the virtuous cycle of enhanced consumption, resource generation for the government, and investments by private sector and wealth creators must continue to sustain it. Let us hope that there’s more money in the hand of the taxpayer, higher spend on infrastructure and support at the bottom of the pyramid in Budget 2021.
The author is leader (Economic Advisory Services), PwC India