Economic Survey 2021-22 Highlights (With Mind Map Notes)

The Finance Minister of India tabled the Economic Survey 2021-22 in the Parliament a day ahead of the presentation of the Union Budget 2022-23. The Survey threw light on how the Indian economy has performed in the last 12 months. It has also assessed the impact of the coronavirus pandemic on the Indian economy.

About Economic Survey

• It is a flagship document of the Ministry of Finance released just a day ahead of the Union Budget. 
• It gives detailed figures on the state of major sectors of the Indian economy such as agriculture, industry, manufacturing, employment, infrastructure, foreign exchange, exports and imports among others. 
• It also provides information about the policy initiatives and projects undertaken by the government.
• It has been a longstanding tradition in India to present the Economic Survey just before the Budget. 
• The surveys were presented as a part of the Union Budget before 1964 but began to be published separately thereafter to provide a background or context.
• It helps in a better understanding of the economy and the upcoming Union Budget and suggests possible reforms to be undertaken to improve the state of the economy. 

Main features of Economic Survey

• Usually, the economic surveys in India are prepared by the Economics Division of the Department of Economic Affairs of the Finance Ministry under the overall guidance of the Chief Economic Adviser (CEA).
• However, this year it was prepared by the Principal Economic Advisor and other officials in absence of the CEA as days before the Economic Survey, a new CEA was appointed.
• The central theme of this Survey is the “Agile approach” which is based on feedback loops, real-time monitoring of actual outcomes, flexible responses, safety-net buffers and so on.
• Another important theme of this year’s survey is related to the art and science of policymaking under conditions of extreme uncertainty since it was difficult to forecast the impacts of long-term uncertainty concerning the post-Covid world and accelerated shifts in technology, consumer behaviour, supply-chains, geopolitics, climate change and a host of other factors and their unpredictable interactions.
• ‘Process reforms’ have also been considered to be one of the themes of this Survey that has been discussed throughout. It relates to simplification and smoothening of the process for activities where the government’s presence as a facilitator or regulator is necessary.
• The Economic Survey is traditionally published in two volumes. However, this year, it was published in a single volume with a separate volume for Statistical Appendix.
• Along with sectoral chapters, a new chapter has also been added that demonstrates the use of satellite and geo-spatial images to gauge various economic phenomena – urbanization, infrastructure, environmental impact, farming practices and so on. 

Highlights of Economic Survey 2021-22

• State of the Economy
  • The Survey predicts that the Indian economy may witness 9.2 per cent growth in 2021-22.
  • Additionally, the Survey forecasts a GDP growth of 8.0-8.5 per cent in 2022-23.
    • This can be compared to the World Bank’s and Asian Development Bank’s latest forecasts of real GDP growth of 8.7 per cent and 7.5 per cent respectively for 2022-23.
    • The IMF’s latest World Economic Outlook (WEO) growth projections suggest that India’s GDP will grow at 9 per cent in both 2021-22 and 2022-23 and 7.1 per cent in 2023-24 making India the fastest-growing major economy in the world in all these three years 
  • As per the Survey, Agriculture and Allied sectors have undergone minimum impact due to the Covid-19 pandemic and may grow at a rate of 3.9 per cent in 2021-22.
  • Advance estimates suggest that the Gross Value Added (GVA) of industry (including mining and construction) will grow by 11.8 per cent in 2021-22.
  • The Survey says that the service sector in India has been hardest hit due to the pandemic especially in segments where human contact was involved leading to a contraction of 8.4 per cent 2020-21. 
    • The sector is expected to grow by 8.2 per cent in the 2021-22 financial year.
  • Total consumption is estimated to have grown by 7 per cent in 2021-22 with significant contributions from government spending.
  • As per the Survey, Gross Fixed Capital Formation (GFCF) has exceeded pre-pandemic levels reaching a growth of 15 per cent in 2021-22.
  • Exports have seen a growth of 16.5 per cent and imports by 29.4 per cent in 2021-22.
  • India’s balance of payments has remained surplus throughout the last two years.
  • Although the Government’s debt rose and fiscal health deteriorated in 2020-21, there has been a strong rebound in government revenues in 2021-22 so far.
  • Furthermore, India’s capital markets, have done exceptionally well and have allowed record mobilization of risk capital for Indian companies.
  • The banking system also seems to be well-capitalized and Non-Performing Assets (NPAs) have structurally declined.
  • The Survey suggest that private sector investment will also pick up thus helping in the revival of the economy.
  • Overall, the macro-economic stability indicators point towards the fact that the Indian economy is in a good position given its unique response strategy and thus well-poised to take on the challenges of 2022-23.
• Fiscal Developments
  • The revenue receipts of the central government from April to November 2021 have risen by 67.2 per cent (YoY), as against the expected growth of 9.6 per cent in the 2021-22 Budget Estimates (over 2020-21 Provisional Actuals).
  • The Gross Tax Revenue during this period has registered a growth of over 50 per cent in YoY terms which is not only higher than the corresponding period of the previous year but also to the pre-pandemic levels of 2019-20.
  • The gross monthly GST collections have crossed the 1 lakh crore mark consistently since July 2021, after quickly recovering from a dip in June 2021 following the second wave of COVID-19.
  • Capital expenditure has seen a growth of 13.5 per cent (YoY) from April to November 2021 with a focus on infrastructure-intensive sectors.
  • The fiscal deficit for April to November 2021 period has been contained at 46.2 per cent of BE (Budget Estimate) due to a sustained revenue collection and a targeted expenditure policy by the Government of India
  • The central government debt has gone up from 49.1 per cent of GDP in 2019-20 to 59.3 per cent of GDP in 2020-21 due to enhanced borrowings on the account of the Coivd-19 pandemic but is expected to show a declining trajectory with economic recovery.
• External Sector
  • As per the Survey, India’s external trade showed a strong recovery after the pandemic-induced slowdown. This can be attributed to strong capital flows into India that led to a rapid accumulation of foreign exchange reserves.
  • It considered global liquidity tightening and continued volatility of global commodity prices, high freight costs, the fresh resurgence of COVID-19 with new variants as serious challenges that may hamper India’s growth during 2022-23.
  • India’s merchandise exports and imports rebounded strongly and surpassed pre-COVID levels during the current financial year.
  • Despite weak revenue from the tourism sector, India underwent a significant pick-up in net services receipts during April-December, 2021 due to robust software and business earnings, with both receipts and payments crossing the pre-pandemic levels.
  • India’s external debt rose to US$ 593.1 billion as of end-September 2021, from US$ 556.8 billion a year earlier given additional SDR allocation by IMF and higher commercial borrowings.
  • The robust capital inflows led to an augmented foreign exchange reserve crossing the milestone of US$ 600 billion and touched US$ 633.6 billion as of December 31, 2021.
  • As of November 2021, India was the fourth-largest forex reserves holder in the world after China, Japan, and Switzerland.
• Monetary Management and Financial Intermediation
  • The Survey points out that since the beginning of the Covid-19 pandemic, monetary policy and liquidity operations sought to mitigate its adverse impact on the economy.
  • Liquidity remained surplus throughout this period.
  • After several rate cuts in 2019-20 and 2020-21, the repo rate was maintained at 4 per cent in 2021-22.
  • The supply of reserve money and broad money in 2021-22 was lower than in the previous year.
  • Bank credit growth accelerated gradually in 2021-22 up from 5.3 per cent at the beginning of April 2021 to 9.2 per cent as of 31st December 2021.
  • Gross Non-Performing advances ratio of Scheduled Commercial Banks (SCBs) continued to decline from 11.2 per cent at end of 2017-18 to 6.9 per cent at end-September 2021. At the same time, the Net Non-Performing advances ratio declined from 6 per cent to 2.2 per cent during the same period.
  • The capital to risk-weighted asset ratio of SCBs (Scheduled Commercial Banks) continued to increase from 13 per cent in 2013-14 to 16.54 per cent at the end-September 2021.
  • The Return on Assets and Return on Equity for Public Sector Banks was positive from June 2020 to September 2021 despite recording a negative trend (negative profitability ratios) from March 2016 to March 2020.
  • For capital markets, the 2021-22 period was an exceptional year. It saw a boom in fundraising through IPOs. Such a remarkable development was not noticed in any year in the last decade.
  • Additionally, the Indian markets outperformed the major emerging market economies in April-December 2021.
  • On the social security front, the total number of subscribers under the New Pension Scheme (NPS) and Atal Pension Yojana (APY) increased from 374.32 lakh as of September 2020 to 463 lakhs as of September 2021, recording a growth of 23.7 per cent over the year.
• Prices and Inflation 
  • Globally, many advanced and emerging economies witnessed soaring inflation due to COVID-19 related stimulus spending in major economies and demand boosting consumer spending.
  • Crude oil prices also witnessed an upswing due to increased demand from recovering economies and supply restrictions by the Organization of the Petroleum Exporting Countries and its allies (OPEC+).
  • On the domestic front:
    • The average headline Consumer Price Index-Combined (CPI-C) inflation moderated to 5.2 per cent in 2021-22 (April-December) from 6.6 per cent in the corresponding period of 2020-21 and was recorded at 5.6 per cent in December 2021.
    • Food inflation remained at 2.9 per cent (April-December) as against 9.1 per cent in the corresponding period last year.
    • Wholesale inflation based on the Wholesale Price Index (WPI) witnessed a sharp increase, rising to 12.5 per cent during 2021-22 (April-December). This could be attributed to the pick-up in economic activity, sharp increase in international prices of crude oil and other imported inputs, and high freight costs.
    • Some of the essential commodities such as pulses, edible oil, petrol and diesel saw a steep rise in prices. However, proactive measures undertaken by the government, reduction in central excise and subsequent cuts in VAT by most States helped in easing the prices of such commodities.
• Sustainable Development and Climate Change 
  • India’s rank improved from 57 in 2018-19 and 60 in 2019-20 to 66 in 2020- 21 on the NITI Aayog SDG India Index and Dashboard.
    • The number of Front Runners (scoring 65-99) increased to 22 states and UTs in 2020-21 from 10 in 2019-20.
    • Similarly, in North East India, 64 districts were Front Runners and 39 districts were Performers in the NITI Aayog North-Eastern Region District SDG Index 2021-22.
  • India has the tenth largest forest area in the world.
  • In 2020, India ranked third globally in increasing its forest area from 2010 to 2020.
  • Of the total geographical area of India, 24% is covered with forests accounting for 2% of the world’s total forest area in 2020.
  • The forest cover in India has increased by more than 3% from 2011 to 2021.
    • The density of dense forest grew by 20 per cent during the period.
  • In August 2021, the Government of India notified the Plastic Waste Management Amendment Rules, 2021 that aims to phase out single-use plastic by 2022.
  • The compliance status of Grossly Polluting Industries (GPIs) located in the Ganga main stem and its tributaries improved from 39 per cent in 2017 to 81 per cent in 2020.
  • India announced ambitious targets to be achieved by 2030 to enable further reduction in emissions at the 26th Conference of the Parties (COP 26) in Glasgow in November 2021.
    • India also stressed the need to start the one-word movement ‘LIFE’ which means Lifestyle for Environment urging mindful and deliberate utilization instead of mindless and destructive consumption.
  • India continued exercising significant climate leadership at the international stage under the International Solar Alliance (ISA), Coalition for Disaster Resilient Infrastructure (CDRI) and Leadership Group for Industry Transition (LeadIT Group) in 2021.
• Agriculture & Food Management
  • The agriculture sector in India witnessed a growth of 3.6 per cent in 2020-21 and 3.9 per cent in 2021-22.
    • This can be attributed to growth in allied sectors including livestock, dairying and fisheries.
  • The agricultural sector accounted for 18.8 per cent (2021- 22) of the Gross Value Added (GVA) of the country.
  • The net receipts from crop production alone have increased by 22.6 per cent as compared to the previous SAS (Situation Assessment Survey) Report of 2014 although there is a visible diversification in the sources of income of the farmers.
  • Allied sectors including animal husbandry, dairying and fishing are steadily emerging as high growth sectors.
    • The livestock sector has grown at a CAGR of 8.15 per cent over the last five years ending 2019-20. 
    • The latest report of SAS suggests that this sector has been a stable source of income across groups of agricultural households accounting for about 15 per cent of their average monthly income.
  • India runs one of the largest food management programmes in the world and is expanding the coverage of the food security network through schemes like PM Gareeb Kalyan Yojana (PMGKY).
• Industry and Infrastructure
  • The performance of India’s industrial sector has improved showing a growth of 22.9 per cent in the first half of 2021-22 as compared to the corresponding period of 2020-21 and is expected to grow by 11.8 per cent in this financial year.
    • The IIP grew at 17.4 per cent during the period of April-November 2021-22 in comparison to (-)15.3 per cent in April-November 2020-21.
  • As per RBI- Studies on Corporate Performance, the net profit to sales ratio of large corporates reached an all-time high despite the pandemic. 
    • The higher profits could be attributed to buoyant FDI inflows amid improvements in overall business sentiments.
  • The capital expenditure of Indian railways has increased from an average annual of Rs. 45,980 crores during 2009-14 to Rs. 155,181 crores in 2020-21 and is budgeted to further increase to Rs. 215,058 crores in 2021-22.
  • In roadways, the extent of road construction per day increased substantially in 2020-21 to 36.5 km per day from 28 km per day in 2019-20, a rise of 30.4 per cent as compared to the previous year.
  • To provide a major boost to the electronics hardware sector, the Government has brought in several structural and procedural reforms in the telecom sector.
  • Furthermore, several initiatives such as the National Infrastructure Pipeline (NIP), National Monetization Plan (NMP), amongst others, have been taken to boost investment in the infrastructure sector.
• Services
  • During the first half of 2021-22, the Services sector grew by 10.8 per cent and the Gross Value Added (GVA) of Services crossed the pre-pandemic level in Q2 2021-22.
  • However, the GVA of the sub-set sectors (trade, hotels, transport, communication & services related to broadcasting) because of being contact intensive remained below pre-pandemic levels.
  • The GVA of the overall service sector is expected to grow by 8.2 per cent in 2021-22.
  • Service exports saw a downward trend in first three quarters. However, in the fourth quarter of 2021-22, it surpassed its pre-pandemic level.
  • Moreover, the IT-BPM services revenue reached US$ 194 billion in 2020-21, adding 1.38 lakh employees during the same period.
  • During the first half of 2021-22, the service sector received over US$ 16.7 billion FDI accounting for almost 54 per cent of the total FDI inflows into India.
  • The startups in India have shown remarkable growth in the last six years adding over 14,000 new recognised startups in 2021-22 to only 733 in 2016-17. 
    • This has resulted in India becoming the third-largest startup ecosystem in the world after the US and China.
  • Additionally, a record 44 Indian startups have achieved unicorn status in 2021 taking the overall tally of unicorns in India to 83, of which most are in the services sector.
• Social Infrastructure and Employment 
  • Owing to pandemic-induced challenges, Government spending on social services increased significantly recording an increase of 9.8 per cent over 2020-21.
  • As per quarterly Periodic Labour Force Survey (PLFS) data, up to March 2021, employment in the urban sector affected by the pandemic has recovered almost to the pre-pandemic levels.
  • EPFO (Employees Provident Fund Organisation) data suggest that the formalisation of jobs continued during the second-COVID-19-wave and the adverse impact of the Covid-19 pandemic on the formalisation of jobs was much lower than the first wave.
  • Allocation of funds to the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) has been increased to provide the necessary buffer for the unorganized labour in rural areas during the pandemic.
  • As per the latest National Family Health Survey-5, the Government schemes and programmes in the health and social sectors have shown encouraging outcomes.
    • The total fertility rate (TFR) has come down from 2.2 in 2015-16 to 2 in 2019-21.
  • Significant improvements have also been noticed in the health infrastructure and services reaching the public.
  • 83 districts in India have become ‘Har Ghar Jal’ districts under the Jal Jeevan Mission (JJM).

Conclusion

The Economic Survey is a clear picture of the state of India’s economic sector and seeks to point out the factors influencing various developments in these sectors. It has also shown a complete picture of what India has undergone during the pandemic and how it dealt with it. The Survey thus stands out to be a report card of India’s journey through the 2021-22 financial year which was not an easy one.

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