scorecardresearch
Follow Us:
Thursday, July 07, 2022

Economic Survey points to scope for greater govt aid to economy. Credible path for fiscal consolidation is also needed

The continuing distress in the labour market, the sharp rise in inequality, the lingering financial stress among the MSMEs, especially those operating in the informal parts of the economy, are issues that need to be explored more exhaustively.

By: Editorial |
Updated: February 1, 2022 9:21:40 am
It is disturbing the Economic Survey does not examine the uneven nature of the recovery in greater detail.

The economic survey 2021-22, tabled by Finance Minister Nirmala Sitharaman in Parliament on Monday, expects the Indian economy to grow by 8-8.5 per cent in the upcoming financial year, on the back of a 9.2 per cent expansion in 2021-22. The Survey’s projections appear conservative when compared to recent assessments of the IMF, which has pegged the economy to grow at 9 per cent, or the World Bank which expects it to grow at 8.7 per cent. As the annual flagship document of the Ministry of Finance, it is disturbing that the Survey does not examine the uneven nature of the recovery in greater detail. The continuing distress in the labour market, the sharp rise in inequality, the lingering financial stress among the MSMEs, especially those operating in the informal parts of the economy, are issues that need to be explored more exhaustively. While the Survey has sought to assure that when it comes to macro-economic stability, India is better placed than it was at the time of the global financial crisis and the taper tantrum, what is less clear is the extent to which the recovery will heal the scars induced by the pandemic in the near term.

While there is always a gap between growth projections and reality, the Survey has rightly flagged the risks to these projections. To begin with, the external environment is likely to be less benign, and financial conditions will tighten considerably. In its recent World Economic Outlook, the IMF has pegged global GDP growth at 4.4 per cent in 2022, down from 5.9 per cent in 2021, with global trade volumes growth expected to fall in 2022. There is also the threat of another wave of infections and the associated impact on economic activity. Elevated crude oil prices are another area of concern — while the Survey has assumed oil to remain in the range of $70-75 per barrel, crude oil prices are currently around $90.

The Survey has, once again, mounted a strong defence of the policy response to the pandemic, arguing in favour of the emphasis on supply-side oriented measures, rather than relying solely on “demand management”. Even so, coming ahead of the Union budget on Tuesday, the underlying message is of continued government support to the economy. The “government has the fiscal capacity to maintain the support, and ramp up capital expenditure when required,” it says. The sharp rise in central government revenues provides it with the necessary fiscal space. However, considering that the general government debt stands at 89.3 per cent in 2021-22 (BE), up from 74.6 per cent in 2019-20, the government needs to remain mindful of its constraints. The upcoming Union budget will be judged on how the finance minister balances the twin objectives of supporting the economy and putting government finances on a credible path of consolidation.

This editorial first appeared in the print edition on February 1, 2022 under the title ‘Ramp up support’.

Best of Express Premium
New car insurance plan: Premium based on usage, driving behaviourPremium
UPSC Key-July 6, 2022: Why to read ‘Social Media Intermediaries’ or ‘Hybr...Premium
Sir Syed Ahmed Khan and Maulana Azad show how to deal with hurt religious...Premium
Across democracies, supreme courts’ legitimacy, autonomy are under ...Premium

Express Explained Go beyond the news. Understand the headlines with our Explained stories

📣 Join our Telegram channel (The Indian Express) for the latest news and updates

For all the latest Opinion News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
0 Comment(s) *
* The moderation of comments is automated and not cleared manually by indianexpress.com.
Advertisement
Advertisement
Advertisement
Advertisement