In a strong clapback at sceptics of the ruling government, it has been predicted that India's economic growth would accelerate to 7 to 7.5 per cent in the 2018-19 financial year. The Economic Survey 2018, which was tabled in the Parliament on Monday, has vouched that the country will bounce back as the world's fastest-growing major economy, adding that even though the Finance Ministry had planned to reduce the fiscal deficit from an estimated 3.2 per cent of GDP this year to 3 per cent in 2018-19, the economic momentum can be credited to a pause in the move towards a lower deficit.
India's Chief Economic Adviser Arvind Subramanian and his team, while preparing the report, wittingly laid out the policy agenda for the coming year. They have called out to support agriculture, stabilise GST, finish resolution and recapitalisation, privatise Air India, and head off macro-economic pressures. “The cycle calls for ambitious consolidation but the political cycle calls for maybe a more modest consolidation so it has to be a balance between the two,” Subramanian told the press after the report was released to both the Houses by Finance Minister Arun Jaitley. The annual report card of the economy said, “A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 per cent during this fiscal year (2017-18) and will rise to 7 to 7.5 per cent in 2018-19, thereby reinstating India as the world's fastest-growing major economy.”
Boosted by stronger private investment and exports, the recovery forecast comes at a time when rival China expects its economy to slow to a 6.5-6.8 per cent growth rate this year. Subramanian said, “The economy seems to be picking up quite nicely and robustly as the temporary impact of demonetisation and GST has been decimated.” The survey has also cautioned that persistently high oil prices will forever pose as a key risk for a country that depends on imports for almost 80 per cent of fuel.
A sharper judicial system
It also stressed on the need for extensive reforms of the judicial system with a view to promote ease of doing. It said that delays and injunctions are severely impacting the progress of cases, especially commercial disputes. In such cases, the survey said, the government and the courts need to work together for large-scale reforms and incremental improvements to combat a problem that is exacting a large toll from the economy.
“For a smooth contract enforcement regime, it may be imperative to build capacity in the lower judiciary to particularly deal with economic and commercial cases, and allow the high courts to focus on streamlining and clarifying questions of law,” the survey said. It added, “This needs to be supported with greater provision of resources for both tribunals and courts,” also stating that courts may consider prioritising stayed cases and impose stricter timelines within which cases with temporary injunctions may be decided, especially those involving government infrastructure projects.
Beti Bachao
Chapter seven of the survey has extensively talked about gender equality, one of Prime Minister Narendra Modi's key initiatives. “In some sense, once born, the lives of women are improving but society still appears to want fewer to them to be born,” it said. The report took note of the behavioural pattern of Indian parents who prefer to have children “until the desired number of sons are born”. Calling it the “son meta-preference,” it has found that while an average Indian family prefers to have two children, there are instances where families have more than five children if the last child is not a male.
Biologically determined natural sex ratio at birth is 1,050 males per 1,000 females. Sex ratio at birth (SRB) began to stabilise after sex selection was declared illegal in India in 1994. The report pointed out the missing link by analysing the sex ratio of last child (SRLC). The SRLC in the country is biased against females and is lower by 9.5 percentage points in 2015-16 in comparison with other countries.
Climate Change
Subramanian's report has found that the impact of temperature and rainfall on agriculture is felt during extreme changes, when temperatures are much higher, rainfall significantly lower, and the number of “dry days” greater than normal. It noted that such impact is more adverse in lands that are not irrigated as compared to irrigated areas. “Extreme shocks have highly divergent effects between unirrigated and irrigated areas,” the survey said.
The survey said the change in agricultural productivity patterns could potentially reduce annual agricultural incomes by between 15 per cent and 18 per cent on average, and between 20 per cent and 25 per cent particularly for unirrigated areas. Climate change models, like the ones developed by the Intergovernmental Panel on Climate Change, has predicted that temperatures in India are likely to rise by between 3 degrees Celsius and 4 degrees Celsius by the end of the 21st century.
“These predictions, combined with our regression estimates, imply that in the absence of any adaptation by farmers and any changes in policy, farm incomes will be lower by around 12 per cent on an average in the coming years, and unirrigated areas will be the most severely affected, with potential losses amounting to 18 per cent of annual revenue,” the survey said.
