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Tag: economic survey of india

  • Economic Survey: Buoyant tax mop-up frees fiscal area for spending

    A DAY forward of the Union Budget for 2022-23, the Economic Survey tabled within the Lok Sabha by Finance Minister Nirmala Sitharaman identified that buoyant tax revenues supplied the federal government fiscal area to offer further assist to the financial system and proceed the push in favour of upper capital expenditure. Though output in varied contact intensive companies remained under pre-pandemic ranges, it stated the macroeconomic power offered buffers in opposition to possible stresses comparable to withdrawal of stimulus by international central banks.
    A pointy rise in tax collections and a lift to non-tax revenues following RBI’s surplus switch have led to a rise within the income pool. This would allow the federal government to fulfill its fiscal deficit goal of 6.8 per cent of Gross Domestic Product in 2021-22, the Survey stated. “The targeted focus on capital expenditure, with its resulting multiplier effects, will be vital in sustaining the economic growth,” it famous.

    The Survey — which is an financial report card for the present 12 months — additionally argued that the banking sector was now effectively positioned to assist the financial system as it’s “well capitalised and the overhang of non-performing assets seems to have structurally declined.” As and when the demand for credit score returns, the banks are there to assist it, whereas increased authorities spending will crowd in non-public funding, stated Sanjeev Sanyal, Principal Economic Advisor within the Union Finance Ministry.

    Elevated authorities spending, together with a push in capital spending, is feasible because the income receipts of the Central authorities throughout April- November 2021 have elevated 67.2 per cent (year-on-year), as in opposition to the 9.6 per cent progress for the complete 12 months as per Budget Estimates. The mop-up has been buoyant for each direct and oblique taxes. The gross month-to-month Goods and Services Tax collections have crossed the Rs 1 lakh crore mark persistently since July 2021, after rapidly recovering from a dip in June 2021 following the second wave of Covid-19.

    “As the economy grows further, the revenue collection from all the sources is expected to be more robust, which will help to strengthen the fiscal position on one hand, and create fiscal space on the other. Thus, it is expected that reaching the budget estimate for fiscal deficit during 2021-22 will not be a concern for the Central Government,” the Survey stated. The fiscal deficit for April-November 2021 has been contained at 46.2 per cent of Budget Estimates (BE) — as in opposition to 135.1 per cent of BE in April-November 2020 and 114.8 per cent of BE in April-November 2019.
    Responding to the Survey’s statement that on the finish of 2021-22 the financial system would have recovered to the pre-pandemic degree, Congress chief and former Finance Minister P Chidambaram stated, “In plain language, it means that on 31.3.2022 the GDP will be at the same level as it was on 31.3.2020… The two years have impoverished people… This is a time for contrition and change (of approach), not for boasts and no change.”
    The Survey famous increased capital expenditure has been central to the present 12 months’s funds and financial restoration. “The expenditure policy of the Central government during 2021-22 has a strong emphasis on capital expenditure. Budget 2021-22 had not only enhanced the expenditure estimates but also directed them towards more productive capital expenditure. During April to November 2021, capital expenditure registered a growth of 13.5 per cent over April to November 2020 and 28 per cent over April to November 2019,” it stated.
    The authorities has budgeted a 34.5 per cent progress in capital expenditure this 12 months over 2020-21 funds estimates, with emphasis on railways, roads, city transport, energy, telecom, textiles and reasonably priced housing. The Survey commentary signifies the Budget for the following 12 months might go for milder fiscal consolidation whereas persevering with the capital expenditure push.

    Higher spending by states is one other issue that’s anticipated to assist progress. “In the first eight months of the current financial year, states’ capital expenditure has gone up by 67 per cent compared with the previous financial year’s eight months. So in this uncertain pandemic era, governments have done what they are expected to do — front load growth and support it. On the back of it, it will crowd in the private sector, which will lead to job creation and employment growth,” the brand new Chief Economic Adviser V Anantha Nageswaran stated in a press convention.
    In continuation with the “barbell strategy” from earlier 12 months’s Economic Survey, this 12 months’s survey has prompt utilizing the “Agile” strategy to make use of 80 high-frequency indicators “in an environment of extreme uncertainty”. The Agile strategy, utilized in fields like mission administration and know-how improvement, assesses outcomes in brief iterations whereas always making incremental changes.

  • Bumps in street forward: Inflation hit on capital flows, unemployment

    Despite a projected 9.2 per cent development in GDP in FY22 to above pre-Covid ranges, the nation’s economic system continues to face a slew of structural challenges that existed previous to the pandemic and new challenges introduced on by Covid-19.
    Inflation is the strongest of those headwinds. The Economic Survey 2021-22 notes that provide chain disruptions and gradual financial development have contributed to a rise in inflation. The withdrawal of stimulus in developed economies within the upcoming fiscal is prone to have an effect on capital flows into the nation.
    “The surge in energy, food, non-food commodities, and input prices, supply constraints, disruption of global supply chains, and rising freight costs across the globe stoked global inflation during the year,” the Survey mentioned, noting that stimulus spending in developed economies and pent-up demand through the pandemic might result in “imported inflation” in India.
    Retail inflation has moderated to five.2 per cent through the April-December interval of FY22 from 6.3 per cent within the earlier fiscal. Wholesale inflation, which interprets to larger retail inflation over time, has risen sharply to 12.5 per cent within the fiscal up to now — up from 0 per cent final yr and up considerably even from FY19 which was unaffected by Covid-19 and noticed wholesale inflation of 4.3 per cent.
    Key drivers of inflation embrace oils and fat in addition to gas costs pushed up by excessive worldwide costs of the commodities.

    The Survey famous that main economies had begun the method of withdrawing liquidity that was prolonged through the pandemic within the type of stimulus checks and relaxed financial coverage to stimulate an financial restoration. Higher inflation has, nonetheless, led to a winding down of pandemic-related stimulus.
    “The likely withdrawal of liquidity by major central banks over the next year may also make global capital flows more volatile,” it mentioned, noting that this will likely adversely have an effect on capital flows, placing strain on India’s change charge and gradual financial development. Large and rising imports are additionally prone to put strain on India’s change charge if capital flows to the to nation fall because of a withdrawal of stimulus in developed international locations
    An absence of jobs continues to be among the many major considerations for the Indian economic system, with unemployment ranges and labour pressure participation charges remaining worse than pre-pandemic ranges.

    As per knowledge from the Periodic Labour Force Survey (PLFS), whereas the unemployment charge and labour pressure participation charge have improved considerably from the beginning of the pandemic, they’d nonetheless not recovered to pre-Covid ranges by Q4FY21.
    Unemployment charge — which hit a excessive of 20.8 per cent within the first quarter of FY21 — fell to 9.3 per cent in This autumn of the monetary yr, however remained above the extent 7.8 per cent witnessed in Q2 of FY20 which was unaffected by the pandemic.
    The labour pressure participation charge, at 47.5 per cent throughout Q4FY21, was nonetheless beneath the extent of 48.1 per cent seen in Q4FY20.

  • Post-Covid financial system won’t merely be re-inflation of pre-Covid financial system: Economic Survey

    It said that supply-chain breakdowns triggered an interruption of the financial system’s supply-side which additionally squeezed demand, however it’s not right to see the pandemic associated financial slowdown as only a demand downside.
    “…the post-Covid economy will not be merely a re-inflation of the pre-Covid economy. Simply building it back with demand measures is not a solution,” it mentioned.

    The emphasis given to the supply-side in India’s COVID-19 response is pushed by two vital issues: first, Indian policymakers noticed the disruptions attributable to travel-restrictions, lockdowns and supply-chain breakdowns as an interruption of the financial system’s supply-side. “Although this also squeezed demand, it is not correct to see the pandemic related economic slowdown as just a demand problem as happens with most economic cycles,” it mentioned. Second, the post-Covid world shall be impacted by all kinds of things – adjustments in expertise, client behaviour, geo-politics, supply-chains, local weather change, it added.

    The Survey has flagged dangers from rising inflation from each a tighter international liquidity situation and trade charge volatility in international foreign money. “In 2021, inflation picked up globally as economic activity revived with the opening up of economies. Inflation in the US touched 6.8 per cent in November 2021, the highest since 1982, driven largely by energy and food prices. As inflation worries are mounting, a distinct shift towards the unwinding of pandemic-led stimulus is taking hold. This may result in tightening of financial conditions, adversely affecting capital flows, putting pressure on exchange rate and slowing down growth in emerging economies,” it mentioned.

    Highlighting the divergence between wholesale and retail inflation, it mentioned imported inflation is an issue and must be taken into consideration. The excessive WPI-based inflation charge in 2021 is essentially attributable to the low base of the previous 12 months, whereas retail inflation that had remained excessive throughout 2020-21 as a result of provide chain disruptions and excessive meals inflation moderated in 2021-22 on account of efficient provide aspect administration, leading to a divergence between WPI and CPI primarily based inflation, it mentioned. “…unanticipated increase in energy prices and emergence of industrial input cost pressure and high freight costs led to a sharp spike in WPI inflation in 2021. This was reflected in high WPI inflation in the fuel group and manufactured sector during the year. Thus, while on the one hand, low food inflation pulled down CPI, on the other hand high energy and input prices pulled up WPI based inflation rate,” it mentioned.

    The Survey additionally said that the stability of dangers for international commerce is tilted to the draw back, with the largest danger from the pandemic, notably with resurgence of recent variants corresponding to Omicron. In addition to the surge in international inflation, longer port delays, increased freight charges, scarcity of transport containers, scarcity of inputs corresponding to semiconductors, with supply-side disruptions being exacerbated by restoration in demand, pose important dangers, inter alia, for international commerce.
     

  • Economic Survey 2022 Live Updates: Economic Survey 2021-22 to be tabled in Parliament right this moment

    Economic Survey 2022 Live Updates: The Budget Session of the Parliament will begin right this moment with President Ram Nath Kovind addressing each the homes. Thereafter Finance Minister Nirmala Sitharaman will desk the Economic Survey 2021-22.
    The Economic Survey is an annual doc ready by the Ministry of Finance beneath the steering of the Chief Economic Advisor (CEA) and it gives a abstract of annual financial improvement throughout the nation in the course of the monetary 12 months 2021-22.
    The authorities on Friday appointed Dr. V Anantha Nageswaran as the brand new CEA including in a press release that he has assumed cost. He changed KV Subramanian whose three-year time period led to December.