GS 3 Indian Economy Issues relating to planning, mobilization, of resources, growth, development and employment.
Introduction
India’s economy is firmly in the middle of a V-shaped recovery and will bounce back to record 11% growth in 2021-22 after an estimated 7.7% contraction this year, according to a ‘conservative’ estimate in the Economic Survey 2020-21.
The Survey termed the growth a ‘lockdown dividend’ from the country’s stringent response to the COVID-19 pandemic.
Background:Economic Survey 2020- 2021:
Theme: Dedicated to all the COVID-19 warriors, who have really helped in upholding India.
- Saving Lives and livelihoods
- COVID warriors joined hands to uphold India
- V-shaped economic recovery
- Opportunities outweigh risks
This year’s economic survey is being delivered in an e-book format.
The Finance Ministry has also launched an official Economic Survey app for smooth access to the document.
India reaping ‘lockdown dividend’ by saving lives and livelihood:
- From the preventive measures India adopted its willingness to take short-term pain for long-term gain
- India was amongst the first of the countries that imposed a national lockdown
- when there were only 500 confirmed cases.
- The document also said India is witnessing a V-shaped recovery with a stable macroeconomic situation aided by
- a stable currency
- comfortable current account
- burgeoning forex reserves
- encouraging signs in the manufacturing sector output.
- To implement its strategy, India imposed the most stringent lockdown at the very onset of the pandemic.
- This enabled flattening of the pandemic curve
- thereby, provided the necessary time to ramp up the health and testing infrastructure.
- As per the survey, India has transformed the short-term trade-off between lives and livelihoods
- into a win-win in the medium to long-term that saves both lives and livelihoods.
- By estimating the natural number of cases and deaths expected across countries based on their population, population density, demographics, tests conducted, and the health infrastructure,
- the survey compare these estimates with actual numbers to show that India restricted the COVID-19 spread by 37 lakh cases and saved more than 1 lakh lives.(feb 2021)
High out-of-pocket expenses for health can lead to poverty:
- India has one-of-the highest level of Out-Of-Pocket Expenditures (OOPE) contributing directly to the high incidence of catastrophic expenditures and poverty.
- It suggested an increase in public spending from 1% to 3% of GDP as envisaged in the National Health Policy 2017
- can decrease the OOPE from 65% to 30% of overall healthcare spend.
- The Survey states about 65% of deaths in India are now caused by Non-Communicable Diseases (NCDs) with ischemic heart diseases, chronic obstructive pulmonary disease (COPD) and stroke being the leading causes.
- The Survey observes that the health of a nation depends critically on its citizens having access to an equitable, affordable and accountable healthcare system.
- The OOPE, as a share of total health expenditure, drops precipitously when public health expenditure increases.
- The Survey also underlines that OOPE for health increases the risk of vulnerable groups slipping into poverty because of catastrophic health expenditures.
- The life expectancy in a country correlates positively with per capita public health expenditure.
Democratic country Focusing on long-term gains:
- The Survey defended the conservative fiscal stimulus during the initial phase of the pandemic,
- stating that pushing down on the accelerator while the brakes are clamped ‘only wastes fuel’.
- The V-shaped economic recovery while avoiding a second wave of infections make India a sui generis case in this unique, synchronized global recession
- Adding that a rapid vaccination roll-out this year could boost recovery in the services sectors as well as stir up private consumption and investment.
- With India expected to emerge as the fastest growing economy in the next two years as per IMF
- The country’s “mature policy response to this crisis provides important lessons for democracies to avoid myopic policy-making and demonstrates the significant benefits of focusing on long-term gains”.
Infrastructure quintessential to boost growth:
- Post unlocking of the economy, infra sectors are poised for growth and construction of roads is expected to return to the high pace attained before COVID-19.
- The infrastructure sector will be the key to overall economic growth and macroeconomic stability.
- Emphasising that the year after the crisis (2021-22) will require sustained and calibrated measures
- to facilitate the process of economic recovery and enable the economy to get back on its long-term growth trajectory.
- Basic infrastructure facilities in the country provide the foundation of growth.
- In the absence of adequate infrastructure, the economy operates at a suboptimal level and remains distant from its potential and frontier growth trajectory.
- The strong backward-forward linkages of the infrastructure sector are well established.
- Therefore, investment in infrastructure is quintessential for more rapid and inclusive economic growth.
Conclusion:
The global economy, including India, has been set back in time by the pandemic induced crisis. In the five years before 2020-21, Indian economy grew at an average growth of 6.7%.
It is assumed that the economy grows at its trend growth rate of 6.5% in 2022-23 and 7% in 2023-24, aided by the structural reforms