Economy remains strong with support of Atmanirbhar Bharat Mission: Economic Survey 2020-21

The fundamentals of the economy remain strong as gradual scaling back of lockdowns. The astute support of Atmanirbhar Bharat Mission has placed the Indian economy firmly on the path of revival.

The Finance Minister Nirmala Sitharama in the Economic Survey 2020-21 said this path would entail a growth in real GDP by 2.4 per cent over the absolute level of 2019-20 implying that the economy would take two years to reach and go past the pre-pandemic level. These projections are in line with the IMF estimate of real GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23.

The Survey highlights that India’s mature policy response to this “once-in-a-century” crisis provides important lessons for democracies to avoid myopic policymaking. It demonstrates the significant benefits of  focusing on long-term gains. India, on its part, adopted a unique four-pillar strategy of containment, fiscal, financial and long-term structural reforms. Calibrated fiscal and monetary support was provided given the evolving economic situation, cushioning the vulnerable in the lockdown and boosting consumption and investment while unlocking, mindful of fiscal repercussions and entailing debt sustainability. Sitharaman said a favourable monetary policy ensured abundant liquidity and immediate relief to debtors via temporary moratoria, while unclogging monetary policy transmission.

India GDP to contract further

India’s GDP, according to the Survey, is estimated to contract by 7.7 per cent in FY2020-21, composed by a sharp 15.7 per cent decline in first half and a modest 0.1 per cent fall in the second half. Sector wise, agriculture has remained the silver lining, while contact-based services, manufacturing, construction were hit hardest, and have been recovering steadily. Government consumption and net exports have cushioned the growth from diving further down.

It has to be noted that while the lockdown resulted in a 23.9 per cent contraction in GDP in Q1, the recovery has been v-shaped, one as seen in the 7.5 per cent decline in Q2 after the sharp decline in Q1. The reignited inter and intra state movement and record-high monthly GST collections have marked the unlocking of industrial and commercial activity. A sharp rise in commercial paper issuances, easing yields and sturdy credit growth of MSMEs portend revamped credit flows for enterprises to survive and grow.

Also Read: Agri policy needs to focus on small & marginal farmers: President

The pandemic-hit year saw manufacturing sector’s resilience, rural demand cushioning overall economic activity and structural consumption shifts in booming digital transactions. Furthermore, agriculture is set to cushion the shock of the COVID-19 pandemic on the Indian economy in 2020-21 with a growth of 3.4 per cent in both Q1 and Q2. A series of progressive reforms undertaken by the government have contributed to nourishing a vibrant agricultural sector, which remains a silver lining to India’s growth story of FY2020-21.