Government Has No Business Being in Business - Economic Survey reiterates Modi's Minimum Government and Maximum Governance pledge

[Anubhav Gupta]

Key Highlights of Economic Survey 2019-20

1. Theme of the Survey: Wealth Creation: The Invisible Hand Supported by the Hand of Trust
   1. India’s aspiration to become a $5 trillion economy depends critically on:
      1. Strengthening the invisible hand of the market by promoting pro-business policies.
      2. Introducing the idea of trust as a public good, which gets enhanced with greater use.
      3. Further, focus should be on Promoting ‘pro-business’ policy that unleashes the power of competitive markets to generate wealth and weaning away from ‘pro-crony’ policy that may favour specific private interests, especially powerful incumbents.
2. Survey notes that Entrepreneurship is the strategy to fuel productivity growth and wealth creation in line with the Government’s initiative to encourage entrepreneurship. Entrepreneurship at district level has a significant impact on wealth creation at the grassroots. Further, as per World Bank India ranks 3^rd in number of new firms created, with registration of new firms higher in service sector as compared to others. The survey also highlights that literacy and education in a district to be key elements to significantly foster local entrepreneurship.
3. The Survey highlights various instances of Governmental intervention like price control through Essential Commodities Act, 1955, Drug Price Control, Governmental intervention in grain markets and debt waivers, which though well intended, often ends up undermining the ability of the markets to support wealth creation and leads to outcomes opposite to those intended. Thus, the survey suggests that Government must systematically examine areas of needless intervention and undermining of markets.
4. Suggestion to cash on the opportunity to achieve a China-like, labour-intensive, export trajectory, though an initiative named as “Assemble in India” and integrate the same with “Make in India” for creating jobs and achieving desired growth.  It is argued that exports of network products under such initiative can provide one-quarter of the increase in value added required for making India a $5 trillion economy by 2025.
5. Focus on improving Ease of Doing Business by substantially reducing the logistics time frame though close coordination between the Logistics division of the Ministry of Commerce and Industry, the Central Board of Indirect Taxes and Customs, Ministry of Shipping and the different port authorities and by following a sector wise targeted approach identify and resolve the regulatory and process bottlenecks for each segment.
6. The Survey highlights the need of a large economy like India for an efficient banking sector to support its growth. The Survey notes that Public Sector Banks (constituting 70% of Indian Banking Sector) are inefficient compared to their peer groups on every performance parameter. In 2019, investment for every rupee in PSBs, on average, led to the loss of 23 paise, while similar investment in Non Public Sector Banks led to the gain of 9.6 paise. Thus, there is an urgent need to make the PSBs more efficient.
7. The survey has suggested for creation of a GSTN type entity that will aggregate data from all PSBs and use technologies like big data, artificial intelligence and machine learning in credit decisions for ensuring better screening and monitoring of borrowers, especially the large ones.
8. The Survey has examined the realized efficiency gains from privatization in the Indian context and encourages for aggressive disinvestment of Central Public Sector Entities. Noting the successful disinvestment of HPCL, Survey suggests aggressive disinvestment of CPSEs to bring in higher profitability, promote efficiency, increase competitiveness and promote professionalism.
9. The Survey clarifies that the concerns of a misestimated and overstated Indian GDP are unsubstantiated by the data and are thus unfounded. The Survey notes that several advanced economies such as UK, Germany and Singapore have their GDPs misestimated with incompletely specified econometric model and that correctly specified models that account for all unobserved differences and differential trends in GDP growth across countries fail to find any misestimating of growth in India or other countries.
10. The Survey notes that affordability of vegetarian Thalis improved 29 % and that of  non-vegetarian Thalis improved by 18 % from 2006-07 to 2019-20.
11. The Survey highlights that the volatility of prices for most of the essential food commodities with the exception of some of the pulses has actually come down in the period 2014-19 as compared to the period 2009-14.The lower volatility might indicate the presence of better marketing channels, storage facilities and effective MSP system.
12. The Survey further reiterated the country’s commitment to Sustainable Development and Climate Change by increasing its forest and tree cover to 80.73 million hectares i.e. 24.56 % of the geographical area of the country. It further acknowledges the role played by India as Enabler, Facilitator, Incubator, Accelerator in the International Solar Alliance.
13. The Survey also mentions the Increasing significance of services sector in the Indian economy contributing around 55 % of the total size of the economy and Gross Value Addition growth, accounting for two-thirds of total FDI inflows into India and about 38 per cent of total exports.
14. The Survey also discussed various fiscal parameters which showcase the various challenges faced by the Indian Economy and also provides various positive indicators to achieve the targeted growth rate.