The Key Highlights of Economic Survey 2018-19 presented in the Parliament by FM Nirmala Sitharaman on 4th July 2019 are as follows:

Shifting gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand

• Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the bottom of the pyramid.
• Sustained real GDP growth rate of 8% needed for a $5 trillion economy by 2024-25.
• “Virtuous Cycle” of savings, investment and exports catalyzed and supported by a favorable demographic phase required for sustainable growth.
• Private investment– key driver for demand, capacity, labor productivity, new technology, creative destruction and job creation.
• Survey departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.
• Key ingredients for a self-sustaining virtuous cycle:
  • Presenting data as a public good.
  • Emphasizing legal reforms.
  • Ensuring policy consistency.
  • Encouraging behavior change using principles of behavioral economics.
  • Nourishing MSMEs to create more jobs and become more productive.
  • Reducing the cost of capital.
  • Rationalizing the risk-return trade-off for investments.

Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth

• Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.
• Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by number.
• Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.
• Large firms (more than 100 employees) account for 75% employment and close to 90% of productivity despite accounting for about 15% by number.
• Unshackling MSMEs and enabling them to grow by way of:
  • A sunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.
  • Deregulating labor law restrictions to create significantly more jobs, as evident from Rajasthan.
  • Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
• Survey also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, entertainment etc., for job creation.

India’s Demography at 2040: Planning Public Good Provision for the 21st Century

• Sharp slowdown in population growth expected in next 2 decades. Most of India to enjoy demographic dividend while some states will transition to ageing societies by 2030s.
• National Total Fertility Rate expected to be below replacement rate by 2021.
• Working age population to grow by roughly 9.7 mn per year during 2021-31 and 4.2 mn per year during 2031-41.
• Significant decline to be witnessed in elementary school-going children (5-14 age group) over next two decades.
• States need to consolidate/merge schools to make them viable rather than build new ones.
• Policy makers need to prepare for ageing by investing in health care and by increasing the retirement age in a phased manner.

From Swachh Bharat to Sundar Bharat via Swasth Bharat: An Analysis of the Swachh Bharat Mission

• Traceable health benefits brought about by Swachh Bharat Mission (SBM).
• 93.1% of the households have access to toilets.
• 96.5% of those with access to toilets are using them in rural India.
• 100% Individual Households Latrine (IHHL) Coverage in 30 states and UTs.
• Financial savings from a household toilet exceed the financial costs to the household by 1.7 times on average and 2.4 times for poorest households.
• Environmental and water management issues need to be incorporated in SBM for sustainable improvements in the long-term.

Enabling Inclusive Growth through Affordable, Reliable and Sustainable Energy

• 2.5 times increase in per capita energy consumption needed for India to increase its real per capita GDP by $5000 at 2010 prices, and enter the upper-middle income group.
• 4 times increase in per capita energy consumption needed for India to achieve 0.8 Human Development Index score.
• India now stands at 4th in wind power, 5th in solar power and 5th in renewable power installed capacity.
• Rs 50,000 crore saved and 108.28 million tonnes of CO2 emissions reduced by energy efficiency programmes in India.
• Share of renewable (excluding hydro above 25 MW) in total electricity generation increased from 6% in 2014-15 to 10% in 2018-19.
• Thermal power still plays a dominant role at 60% share.
• Market share of electric cars only 0.06% in India while it is 2% in China and 39% in Norway.
• Access to fast battery charging facilities needed to increase the market share of electric vehicles.

Redesigning a Minimum Wage System in India for Inclusive Growth

• Survey proposes a well-designed minimum wage system as a potent tool for protecting workers and alleviating poverty.
• Present minimum wage system in India has 1,915 minimum wages for various scheduled job categories across states.
• 1 in every 3 wage workers in India not protected by the minimum wage law.
• Survey supports rationalization of minimum wages as proposed under the Code on Wages Bill.
• Minimum wages to all employments/workers proposed by the Survey.
• ‘National Floor Minimum Wage’ should be notified by the Central Government, varying across five geographical regions.
• Minimum wages by states should be fixed at levels not lower than the ‘floor wage’.
• Minimum wages can be notified based either on the skills or on geographical region or on both grounds.
• Survey proposes a simple and enforceable Minimum Wage System using technology.
• ‘National level dashboard’ under the Ministry of Labour & Employment for regular notifications on minimum wages, proposed by the Survey.
• Toll-free number to register grievance on non-payment of the statutory minimum wages.
• Effective minimum wage policy as an inclusive mechanism for more resilient and sustainable economic development.

State of the Indian Economy in 2018-19: A Macro View

• India still the fastest growing major economy in 2018-19.
• Growth of GDP moderated to 6.8 per cent in 2018-19 from 7.2 per cent in 2017-18.
• Inflation contained at 3.4 per cent in 2018-19.
• Non-Performing Assets as percentage of Gross Advances reduced to 10.1 per cent at end December 2018 from 11.5 per cent at end March 2018.
• Investment growth recovering since 2017-18:
  • Growth in fixed investment picked up from 8.3 per cent in 2016-17 to 9.3 per cent next year and further to 10 per cent in 2018-19.
• Current account deficit manageable at 2.1 per cent of GDP.
• Fiscal deficit of Central Government declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19.
• Prospects of pickup in growth in 2019-20 on the back of further increase in private investment and acceleration in consumption.

Fiscal Developments

• FY 2018-19 ended with fiscal deficit at 3.4 per cent of GDP and debt to GDP ratio of 44.5 per cent (Provisional).
• As per cent of GDP, total Central Government expenditure fell by 0.3 percentage points in 2018-19 PA over 2017-18:
  • 0.4 percentage point reduction in revenue expenditure and 0.1 percentage point increase in capital expenditure.
• States’ own tax and non-tax revenue displays robust growth in 2017-18 RE and envisaged to be maintained in 2018-19 BE.
• General Government (Centre plus states) on the path of fiscal consolidation and fiscal discipline.
• The revised fiscal glide path envisages achieving fiscal deficit of 3 per cent of GDP by FY 2020-21 and Central Government debt to 40 per cent of GDP by 2024-25.

Money Management and Financial Intermediation

• Banking system improved as NPA ratios declined and credit growth accelerated.
• Insolvency and Bankruptcy Code led to recovery and resolution of significant amount of distressed assets and improved business culture.
  • Till March 31, 2019, the CIRP yielded a resolution of 94 cases involving claims worthINR1, 73,359 crore.
  • As on 28 Feb 2019, 6079 cases involving INR2.84 lakh crores have been withdrawn.
  • As per RBI reports, INR50,000 crore received by banks from previously non-performing accounts.
  • Additional INR50,000 crore “upgraded” from non-standard to standard assets.
• Benchmark policy rate first hiked by 50 bps and later reduced by 75 bps last year.
• Liquidity conditions remained systematically tight since September 2018 thus impacting the yields on government papers.
• Financial flows remained constrained because of decline in the equity finance raised from capital markets and stress in the NBFC sector.
  • Capital mobilized through public equity issuance declined by 81 per cent in 2018-19.
  • Credit growth rate y-o-y of the NBFCs declined from 30 per cent in March 2018 to 9 per cent in March 2019.

Sustainable Development and Climate Change

• India’s SDG Index Score ranges between 42 and 69 for States and between 57 and 68 for UTs:
  • Kerala and Himachal Pradesh are the front runners with a score of 69 amongst states.
  • Chandigarh and Puducherry are the front runners with a score of 68 and 65 respectively among the UTs.
• Namami   Gange Mission launched as a key policy priority towards achieving the SDG 6, with a budget outlay of INR. 20,000 crore for the period 2015-2020.
• For mainstreaming Resource Efficiency approach in the development pathway for achieving SDGs, a national policy on Resource Efficiency should be devised.
• A comprehensive NCAP launched in 2019 as a pan India time bound strategy for:
  • Prevention, control and abatement of air pollution
  • Augmenting the air quality monitoring network across the country.
• Achievements in CoP 24 in Katowice, Poland in 2018:
  • Recognition of different starting points for developed and developing countries.
  • Flexibilities for developing countries.
  • Consideration of principles including equity and Common but Differentiated Responsibilities and Respective Capabilities.
• Paris Agreement also emphasizes the role of climate finance without which the proposed NDCs would not fructify.
• Though the international community witnessed various claims by developed countries about climate finance flows, the actual amount of flows is far from these claims.
• Scale and size of investments required to implement India’s NDC requires mobilizing international public finance and private sector resources along with domestic public budgets.

External Sector

• As per WTO, World trade growth slowed down to 3 per cent in 2018 from 4.6 per cent in 2017. Reasons:
  • Introduction of new and retaliatory tariff measures.
  • Heightened US-China trade tensions.
  • Weaker global economic growth.
  • Volatility in financial markets (WTO).

• In Indian rupee terms growth rate of exports increased owing to depreciation of the rupee while that of imports declined in 2018-19.
• Net capital inflows moderated in April-December of 2018-19 despite robust foreign direct investment (FDI) inflows, outweighed by withdrawals under portfolio investment.
• India’s External Debt was US$ 521.1 billion at end-December 2018, 1.6 per cent lower than its level at end-March 2018.
• The key external debt indicators reflect that India’s external debt is not unsustainable.
• The total liabilities-to-GDP ratio, inclusive of both debt and non-debt components, has declined from 43 per cent in 2015 to about 38 per cent at end of 2018.
• The share of foreign direct investment has risen and that of net portfolio investment fallen in total liabilities, reflecting a transition to more stable sources of funding the current account deficit.
• The Indian Rupee traded in the range of 65-68 per US$ in 2017-18 but depreciated to a range of 70-74 in 2018-19.
• The income terms of trade, a metric that measures the purchasing power to import, has been on a rising trend, possibly because the growth of crude prices has still not exceeded the growth of India’s export prices.
• The exchange rate in 2018-19 has been more volatile than in the previous year, mainly due to volatility in crude prices, but not much due to net portfolio flows.
• Composition of India’s exports and import basket in 2018-19(P):
  • Exports (including re-exports): INR23, 07,663 Cr.
  • Imports: INR35, 94,373 Cr.
  • Top export items continue to be Petroleum products, precious stones, drug formulations, gold and other precious metals.
  • Top import items continue to be Crude petroleum, pearl, precious, semi-precious stones and gold.
  • India’s main trading partners continue to be the US, China, Hong Kong, the UAE and Saudi Arabia.

• India has signed 28 bilateral / multilateral trade agreements with various country/group of countries. In 2018-19,
  • Exports to these countries stood at US$121.7 billion accounting for 36.9 per cent of India’s total exports.
  • Imports from these countries stood at US$266.9 billion accounting for 52.0 per cent of India’s total imports.

Industry and Infrastructure

• Overall Index of Eight Core Industries registered a growth rate of 4.3 percent in 2018-19.
• India’s ranking improved by 23 to 77^th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.
• Road construction grew @ 30 km per day in 2018-19 compared to 12 km per day in 2014-15.
• Rail freight and passenger traffic grew by 5.33 per cent and 0.64 per cent respectively in 2018-19 as compared to 2017-18.
• Total telephone connections in India touched 118.34 crore in 2018-19.
• The installed capacity of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in 2018.
• Public Private Partnerships are quintessential for addressing infrastructure gaps.
• Building sustainable and resilient infrastructure has been given due importance with sector specific flagship programmes such as SAUBHAGYA scheme, PMAY etc.
• Institutional mechanism is needed to deal with time-bound resolution of disputes in infrastructure sector.

Services Sector

• Services sector (excluding construction) has a share of 54.3 per cent in India’s GVA and contributed more than half of GVA growth in 2018-19.
• The IT-BPM industry grew by 8.4 per cent in 2017-18 to US$ 167 billion and is estimated to reach US$ 181 billion in 2018-19.
• The services sector growth declined marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.
  • Accelerated sub-sectors: Financial services, real estate and professional services.
  • Decelerated sub-sectors: Hotels, transport, communication and broadcasting services.

• Services share in employment is 34 per cent in 2017.
• Tourism:
  • 10.6 million foreign tourists received  in 2018-19 compared to 10.4 million in 2017-18.
  • Forex earnings from tourism stood at US$ 27.7 billion in 2018-19 compared to US$ 28.7 billion in 2017-18.

Social Infrastructure, Employment and Human Development

• The public investments in social infrastructure like education, health, housing and connectivity is critical for inclusive development.
• Government expenditure (Centre plus States) as a percentage of GDP on
  • Health: increased to 1.5 per cent in 2018-19 from 1.2 per cent in 2014-15.
  • Education: increased from 2.8 per cent to 3 per cent during this period.
• Substantial progress in both quantitative and qualitative indicators of education is reflected in the improvements in Gross Enrolment Ratios, Gender Parity Indices and learning outcomes at primary school levels.
• Encouraging Skill Development by:
  • Introduction of the skill vouchers as a financing instrument to enable youth obtain training from any accredited training institutes.
  • Involving industry in setting up of training institutes in PPP mode; in curriculum development; provision of equipment; training of trainers etc.
  • Personnel of Railways and para-military could be roped in for imparting training in difficult terrains.
  • Create a database of Instructors, skill mapping of rural youth by involving local bodies to assess the demand-supply gaps are some of the other initiatives proposed.
• Net employment generation in the formal sector was higher at 8.15 lakh in March, 2019 as against 4.87 lakh in February, 2018 as per EPFO.
• Around 1, 90, 000 km of rural roads constructed under Pradhan Mantri Gram Sadak Yojana (PMGSY) since 2014.
• About 1.54 crore houses completed under Pradhan Mantri Awas Yojana (PMAY) as against a target of 1 crore pucca houses with basic amenities by 31^st March, 2019.
• Accessible, affordable and quality healthcare being provided through National Health Mission and Ayushman Bharat scheme for a healthy India.
• Alternative healthcare, National AYUSH Mission launched to provide cost effective and equitable AYUSH healthcare throughout the country to address the issue of affordability, by improving access to these services.
• Employment generation scheme, MGNREGA is prioritized by increasing actual expenditure over the budgetary allocation and an upward trend in budget allocation in the last four years.