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Economic Survey: Need to relax fiscal deficit for the current fiscal to revive growth

Economic Survey: Need to relax fiscal deficit for the current fiscal to revive growth

February 2020

The Annual Economic Survey 2019-20, prepared by a team headed by the Chief Economic Adviser Krishnamurthy Subramanian, and tabled by Finance Minister Nirmala Sitharaman on Friday projected growth for the next fiscal starting April 2020-21 at 6 per cent to 6.5 per cent. It has also retained the growth numbers for the current fiscal at 5 per cent.

Basis the Economic Survey 2020, Anshuman Magazine, Chairman & CEO - India, South East Asia, Middle East & Africa, CBRE, shares, “The latest Economic Survey is a testament to India’s resilience in the face of an economic slowdown. Although India’s GDP growth has moderated to less than 5 per cent in 2019-20, what is heartening is that this slowdown would be short-lived, with 2020-21 growth expected to be in the range of 6-6.5 per cent. Moreover, the government’s vision of delivering a US$ 5 trillion economy seems intact despite the setback of a slower than expected GDP growth. This is because India is poised to rebound towards this goal on the back of sustained infrastructure investment, demographic strength and macro-economic fundamentals. The real estate sector has also benefitted from this underlying resilience of the Indian economy, with commercial real estate witnessing never-seen-before leasing levels of 61.6 million sq ft and investments in RE growing by 27 per cent y-o-y to reach US$ 6.06 billion in 2019.”

Arun Kumar, Chairman & CEO, KPMG in India, shares, “The Economic Survey rightly shines the spotlight on some cardinal themes that are vital for India’s aspirations to become a US$ 5-trillion economy by 2025: strengthening trust in the economy, better enforcement of contracts, enabling and empowering markets, promotion of pro-business policies, and measures to enhance farmer’s income. The survey has suggested another round of policy interventions for making it easier to open new businesses, register property, pay taxes and to enforce contracts. The survey has emphasised on the need for India to benefit from the current trends in global manufacturing value chains with its exhortation to integrate ‘Assemble in India for the world’ into approaches to Make in India. To give a further boost to infrastructure creation for enabling growth, enhancing livelihoods, and improving competitiveness,  the survey proposes a spending requirement of US$ 1.4 trillion to attain India’s US$ 5-trillion goal, along with measures required to scale up the banking sector. The survey has delineated key sectors and policy measures towards meeting India’s growth aspirations. It also underscores the need for measures to strengthen trust across the economy as well as foster ethical wealth creation.

Elias George, Partner and National Head – Infrastructure, Government and Healthcare (IGH), KPMG in India, says, “The government has rightly emphasized the need to ramp up and modernize India’s infrastructure stock for improving everyone’s ease of living, for enabling and enhancing  livelihoods, and for reviving economic growth. The survey underlines the need to spend US$ 1.4 trillion to attain our national aspirations of becoming a $5-trillion economy by 2025, and also highlights the need for building next generation infrastructure, as well as for measures to create an appropriate enabling environment to meet the requirements of industry 4.0. The focus of the survey on further simplifying processes involved in setting up new businesses, as well as on facilitating business aspirations at a district level are in accordance with its overarching goal of equitable and universal wealth creation. Realising economic growth targets and attaining national aspirations call for not just renewed focus and investment in key sectors like infrastructure and rural empowerment, but also on establishing and enabling a climate of trust. Consequently, the survey’s emphasis on strengthening India’s trust economy and on the creation of simpler and speedier contractual enforcement regimes are indeed most welcome.”

Rajani Sinha, Chief Economist & National Director-Research, Knight Frank India, shares, “The survey has projected GDP growth of 6-6.5 per cent in FY21. This will require strong boost to consumption for the growth to pick up to these levels. Sharp pick up in investment growth looks difficult given the excess capacity in the manufacturing sector, poor health of NBFC sector and high NPAs plaguing the banking sector. The Survey has correctly identified the weakening health of the NBFC sector and suggested a framework for policy makers to efficiently allocate liquidity enhancements in the sector. The detailed discussion on infrastructure shows the Government’s strong intent to push up infrastructure investment as long-term growth propeller for the economy. The more critical aspect would be increased budgetary allocation for infrastructure investment in the Union Budget for FY21."

Dr Niranjan Hiranandani, President, ASSOCHAM & NAREDCO, says, ASSOCHAM welcomes the positive outlook of Economic Survey report presented today where in India’s economic growth is projected at 6 per cent to 6.5 per cent in the next financial year starting April 1, 2020. However, we strongly advocate that the central government needs to announce bolder policy and fiscal measures to recover from sharp economic downturn and somnolent market scenario. The success of economic green shoots lies in connecting the right dots for economic prosperity in an immediate time frame. The projected much tepid growth on the expected lines for the year 2019-20 at 5 per cent reveals that growth has bottomed out. The Economic Survey highlighted the need to relax fiscal slippage in terms of prudent spending with a primary objective to bounce back from economic doldrums. As India Inc well appreciates the significant progress of Nation’s global rankings across various parameters, there is a lot more bridges to build for nullifying the economic gaps. Proactive measures should be undertaken to push India amongst top 50 nations in global pecking order of Ease of doing business mechanism and make it globally competitive market. We strongly recommend bold fiscal stimulus in the labour intensive sectors which shall have domino effect to enhance employment generation and GDP ratio.”

Watch this space for more on the Budget 2020 Outcome!

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