Highlights of Economic Survey 2021-22

State of economy

• Indian economy is expected to witness real GDP expansion of 9.2 per cent in 2021-22 after contracting in 2020-21. This implies that overall economic activity has recovered past the pre-pandemic levels.
• Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the previous year.
• The Services sector has been the hardest hit by the pandemic, especially segments that involve human contact. This sector is estimated to grow by 8.2 per cent this financial year following last year’s 8.4 per cent contraction.
• Total Consumption is estimated to have grown by 7.0 per cent in 2021-22 with significant contributions from government spending.
• The Indian economy is in a good position to witness GDP growth of 8.0-8.5 per cent in 2022-23.
• As of end-November 2021, India was the fourth-largest foreign exchange reserves holder in the world after China, Japan, and Switzerland.

?Revenue

• The strong revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 2021) means that the Government has fiscal space to provide additional support if necessary.
• The tax collections have been buoyant for both direct and indirect taxes. The gross monthly GST collections have crossed ` 1 lakh crore consistently since July 2021.
• Within direct taxes, personal income tax has grown at 47.2 per cent over April-November 2020 and at 29.2 per cent over the April-November Economic Survey 2021-22. The corporate income tax registered a growth of 90.4 per cent over April-November 2020 and 22.5 per cent over April-November 2019.
• The fiscal deficit for April-November 2021 has been contained at 46.2 per cent of Budget Estimates (BE) which is nearly one third of the proportion reached during the same period of the previous two years (135.1% of BE in April-November 2020 and 114.8% of BE in April-November 2019).

Banking system

• The banking system is well-capitalized and the overhang of Non-Performing Assets seem to have structurally declined even allowing for some lagged impact of the pandemic.
• GNPA ratio of SCBs decreased from 7.5 per cent at the end-September 2020 to 6.9 per cent at the end-September 2021. NNPA ratio of SCBs also declined from 6 per cent at end of 2017-18 to 2.2 per cent at end-September 2021.

Fiscal

• The New Public Sector Enterprise Policy and Asset Monetisation Strategy introduced by the Government reaffirm its commitment towards privatization and strategic disinvestment Fiscal Developments.
• The privatisation of Air India has been particularly important, not only in terms of garnering disinvestment proceeds but also for boosting the privatisation drive.
• During April- November 2021, the capital expenditure has grown by 13.5 per cent (YoY), with focus in infrastructure-intensive sectors like roads and highways, railways, and housing and urban affairs.
• With the enhanced borrowings on account of COVID-19, the Central Government debt has gone up from 49.1 per cent of GDP in 2019-20 to 59.3 per cent of GDP in 2020-21.
• Total liabilities of the Central Government, as a ratio of GDP, which were relatively stable over the past decade have risen sharply in 2020-21. This increase is on account of higher borrowing resorted to due to COVID-19 pandemic as well as sharp contraction in the GDP.

State Finances

• The Gross Fiscal Deficit of States is estimated to cross the Fiscal Responsibility Legislation (FRL) threshold of 3 per cent of GDP during 2020-21 RE and 2021-22 BE. The Revenue Deficit of the States also increased from 0.1 per cent of GDP in 2018-19 to 2 per cent of GDP in 2020-21 (RE).

Inflation

• The average retail inflation which was 4.8 per cent in 2019-20, inched up to 6.2 per cent in 2020-21, on account of COVID-19 related supply chain disruptions and stalled economic activity due to lockdown.
• ?India’s Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 which is within the targeted tolerance band. Wholesale price inflation, however, has been running in double-digits.
• Since July 2021, retail inflation is well within the tolerance band of targeted limit of 4 per cent +/- 2 percentage points set by the Government for the period April 1, 2021- March 31, 2026 (Table 2). Average retail inflation in 2021-22 (April-December) has declined to 5.2 per cent as against 6.6 per cent during April-December 2020-21.
• During the current financial year, retail core inflation (inflation excluding ‘food and beverages’ and ‘fuel and light’ – the transitory components of the index) has shown a rising trend. Average core inflation for the period April-December 2021 stood at 5.9 per cent as against 5.4 per cent in corresponding period last year, and remained below 6 per cent during most months.

Social Infrastructure and Employment

Education

• India spends 3.1% of its GDP on education, 2.1% on health and 3.3% on other social services.
• Considering that most schools shut down during the pandemic, the Computers and digital connectivity of schools have remained low. As of 2019-20 only 22.3% of schools had basic internet facilities. The brunt of this was faced by students across the country who could not physically or virtually attend classes.
• The Ministry of Education has not collated data for the pandemic years of 2020 and 2021, thereby it becomes difficult to assess the impact the pandemic has had on the education system.
• However, ASER (Rural) report also found that during the pandemic, children (age 6-14 years) ‘not currently enrolled in schools’ increased from 2.5 percent in 2018 to 4.6 percent in 2021. ASER report also found that during the pandemic, children in rural areas have moved out of private to government schools in all three age groups.
• However, as pointed out, most government schools lack basic internet and computer facilities to impact education virtually.
• Non-availability of smartphones, non-availability of phones for children to use, and network or connectivity issues were the challenges faced by children especially those in the lower grade. (ASER study).

Agriculture

• The agriculture and allied sectors grew at a positive growth rate of 3.6 per cent during 2020-21.
• Public investment has remained stable between 2-3 per cent over the years, the private investment has fluctuated.
• Recognising that there exists a direct correlation between capital investments in agriculture and its growth rate, there should be a focused and targeted approach to ensure higher public and private investment in the sector.

Skill Development

• Rural males and females have lower formal training as compared to their urban counterparts.
• As per the report of Quarterly Employment Survey (QES) (April-June, 2021) in respect of establishments employing at least 10 workers in major nine sectors, only 17.9% of estimated establishments were imparting formal skill training.
• This is a very low percentage of establishments. Therefore, it is required that the Government remove the disconnect between demand and supply of skilled manpower.
• PM Kaushal Vikas Yojana is one of the flagship schemes in this regard. In 2021-22, under PMKVY 3.0, 3.48 lakh persons have been trained: 50 percent certified and only 16,321 placed.

Employment

• Periodic Labour Force Survey is a comprehensive government data set which is used to analyse trends of employment. However, the data is only available with a large lag which affects policymaking as the government has to rely on MGNREGA and EPFO scheme data.
• Currently, as per the Survey, the unemployment rate stands at 9.3% as of March 2021. The Labour Force Participation rate has declined significantly and so has the worker population ratio. This is a disturbing trend considering that India is a young country which is currently undergoing urbanisation.
• Persons demanding work under MGNREGS still remain above the pre-pandemic level of 2019
• As per PLFS data 2019-2020, about 75 percent of the female workers who joined as self-employed were ‘unpaid family labour.’. This showcases the undercounting of women’s contribution to the country’s economy.
• Of the additional workers who joined the workforce in 2019-20,?90% were in the informal nature of employment and more than 98 percent were in the unorganised sector. About 91% of additional workers were in the unorganised-informal sector.
• Of workers added in 2019-20 shows that more than 71% were in the agriculture sector and females account for about 65% of the total. This further points towards the trends of feminisation of agriculture.

• Persons demanding work under MGNREGS still remain above the pre-pandemic level of 2019

Health Indicators

• Sex ratio at birth, female children per 1000 male children born in the last five years, has grown from 919 in 2015-16 to 929 in 2019-21, which is still low and points towards gender-biased sex selective elimination.
• States such as Himachal Pradesh, Bihar, Jharkhand, Chhattisgarh, Odisha, Maharashtra, Tamil Nadu, Kerala, Meghalaya, Goa and Nagaland have shows a deterioration of sex ratio.

Performance of Schemes

• Swachh Bharat Mission (Grameen): Despite significant improvement, the use of improved sanitation facilities in states such as Bihar (49 percent), Jharkhand (57 percent), Odisha (60 percent), Manipur (65 percent), Madhya Pradesh (65 percent), West Bengal (68 percent), Assam (69 percent) and Uttar Pradesh (69 percent) have remained below the national average of 70 percent in 2019-21.
• Pradhan Mantri Ujjwala Yojana:?While 58.6% of households have been using clean fuel for cooking, in States such as Chhattisgarh, Odisha, Jharkhand, Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh, Assam, West Bengal, Tripura, Nagaland, Arunachal Pradesh, Himachal Pradesh, and Meghalaya the status was below the national average of 58.6% in 2019-21.

Rural Development

• Under Pradhan Mantri Awaas Yojana-Gramin (PMAY-G), the target was not achieved. ?As on 18th January 2022, 2.17 crore houses have been sanctioned and 1.69 crore houses completed against a target of 2.63 crore houses till 2021-22.
• As on 18th January, 2022, the States/UTs have identified 4,46,058 landless beneficiaries in the Permanent Wait List of PMAY-G, out of which 2,05,847 (46 percent) have been provided with land by the concerned States/UT.
• Multidimensional Poverty: As per NITI Aayog’s Multidimensional Poverty Index, Bihar had largest (51.91%) multidimensional poor households, followed by Jharkhand (42.16%), Uttar Pradesh (37.79%), Madhya Pradesh (36.65%), Assam (32.67%) and Rajasthan (39.46%)
• However, Niti Aayog has relied on NFHS -4 data of 2014-15 which is outdated.

Services

• The services sector contributes the most to India’s GDP and suffered the most during the pandemic. Its share in India’s GVA declined from 55 per cent in 2019-20 to 53 per cent in 2021-22.
• The services sector contracted by 8.4 per cent Year on Year (YoY) in 2020-21. This decline was driven by a sharp contraction of 18.2%?YoY in the sub-sector ‘Trade, hotels, transport, communication & services related to broadcasting’ which still remains below the pre pandemic level.
• The sub-sector ‘Public administration, defence & other services’ which includes expenditure by the government on one hand and services such as health, education, recreation etc, on the other, also contracted by 4.6% YoY in 2020-21.
• The freight traffic (rail, air and port) had fallen sharply. However, the freight handled by Indian airports has not achieved the pre-pandemic levels. The strong recovery numbers seen in railway and port handled freight can be attributed to the low base affect.
• While domestic air passenger traffic has almost reached pre-pandemic level, the railway passenger traffic is much below.
• Bank credit growth to the services sector has also seen a downward trend.
• Most of this can be attributed to low growth in credit to “Tourism, Hotel & Restaurants”, “Transport Operators” and Trade-retail as well as wholesale.
• Growth has only picked up in “computer software”, “shipping” and NBFC sector.
• Services sector is the largest recipient of FDI inflows in India. However, during H1 2021-22, the services sector received US$ 16.73 billion FDI equity inflows. Which is 29%?lower than the FDI equity inflows into services in the corresponding period last year.
• This fall was driven by the Computer Software & Hardware sub-sector.
• Patent grant - While India has shown an increasing trend in granting patent rights (from 39,400 in 2010-11 to 45,444 in 2016-17 to 58,502 in 2020-21). It is still far behind it’s counterparts.
• According to the World Intellectual Property Organization (WIPO), the number of patents granted in China, USA, Japan, Korea stood at 5.30 lakh, 3.52 lakh, 1.79 lakh, 1.35 lakh respectively for 2020.
• The cause for this can be attributed to India’s low expenditure on Research and Development which is only 0.7% of its GDP in 2020.
• The procedural delays and complexity of the process is another cause for low patents in India. The average pendency for final decision in acquiring patents in India is 42 months as of 2020.
• This is much higher than 20.8, 20, 15.8 and 15 months respectively for USA, China, Korea and Japan.
• The delay in India’s patent application is also due to the low number of patent examiners in India. The number of patent examiners in India in 2020 were 615 as opposed to 13,704 in China, 8,132 in the United States and 1,666 in Japan.
• And last, there is no time limit prescribed in the statute for grant after the opposition hearing. It has been observed that it takes approximately 6-9 months to conduct hearings to determine the validity of opposition and approximately 3-4 months after that for the controller to take his/her decision.

Sustainable Development and Climate Change

• In 2020, India ranked third globally in increasing its forest area during 2010 to 2020. The forests covered 24 per cent of India’s total geographical area.

However, doubts have been raised over India’s methodology under the India State of Forest Report 2021. It has been stated that India has a very loose definition of the term ‘forest’ which leads to overestimation of the green cover.[1]

• In August 2021, the Plastic Waste Management Amendment Rules, 2021 was notified which is aimed at phasing-out single use plastic by 2022.

The rules mostly phase out products which are produced by local, small and medium plastic manufacturers who supply without any branding. However, items which are produced by big corporations and score low on the utility index but high on environmental impact are not covered by the said Rules.[2]

Plastic packaging waste is not listed to be phased out which contributed to almost 60% of the total plastic waste generated. This highlights a major lacunae in the Rules.[3]

The Rules propose 20 commodities to be phased out unless they are made up of compostable plastic. However, India lacks a clear labelling mechanism to differentiate between compostable and non-compostable plastic.[4]

Therefore, while the aim and objective of the amendment is welcome, it is unlikely to lead to a complete phase out.

• Namami Gange Project: Ganga based covers more than a quarter of India’s land area and supports 43% of it’s population
• However, over years, the expenditure incurred under the Namami Gange Mission had exponentially declined
• Air Pollution: Air pollution is a trans boundary problem which affects almost every State of India . However, funds released under the National Clean Air Programme show a very skewed distribution across various States. Most funds are concentrated in Uttar Pradesh and Maharashtra in 2019-20.
• Climate Change : India launched the National Adaptation Fund on Climate Change (NAFCC) in 2015. However, despite being a developing country, adaptation efforts are largely being financed domestically. Moreover, out of the 30 projects sanctioned under NAFCC, three projects have closed down and no new projects have been sanction under the NAFCC since 2018-19.

Geeta, Gauri and Radhika.

?

?

[1] Aathira Perinchery, The Wire Science, 16th January 2022, "India’s New ‘State of Forest’ Report Is Not Really About Forests" https://science.thewire.in/environment/india-2021-state-of-forest-report-flawed-methods-unverifiable-data-climate-commitments/

[2] Siddharth Ghanshyam Singh, Down to Earth, 17th August 2021, "Single-use plastic ban: Reading the fine print reveals ominous loopholes” https://www.downtoearth.org.in/blog/waste/single-use-plastic-ban-reading-the-fine-print-reveals-ominous-loopholes-78496

[3] Ibid

[4] Ibid