GS 3 Indian Economy Issues relating to planning, mobilization, of resources, growth, development and employment.
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.
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