New Delhi: The Union Finance and Corporate Affairs Minister Nirmala Sitharaman tabled the Economic Survey 2018-19 in the Parliament on Thursday, a day before presenting the Union Budget 2019.
The Economic Survey has projected India would grow at 7 percent in 2019-20 and maintain its fastest growing large economy tag in the world.
Here are the Key Highlights of Economic Survey 2018-19
State of the 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 10.0 per cent in 2018-19.
Current account deficit manageable at 2.1 percent 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.
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As on 28 Feb 2019, 6079 cases involving INR2.84 lakh crores have been withdrawn.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.
Prices and Inflation
Headline inflation based on CPI-C continuing on its declining trend for fifth straight financial year remained below 4.0 per cent in the last two years.
Food inflation based on Consumer Food Price Index (CFPI) also continuing on its declining trend for fifth financial year has remained below 2.0 per cent for the last two consecutive years.
CPI-C based core inflation (CPI excluding the food and fuel group) has now started declining since March 2019 after increment during FY 2018-19 as compared to FY 2017-18.
Miscellaneous, housing and fuel and light groups are the main contributors of headline inflation based on CPI-C during FY 2018-19 and the importance of services in shaping up headline inflation has increased.
CPI rural inflation declined during FY 2018-19 over FY 2017-18. However, CPI urban inflation increased marginally during FY 2018-19. Many States witnessed fall in CPI inflation during FY 2018-19.
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$266.9 billion accounting for 52.0 per cent of India’s total imports.
Overall Index of Eight Core Industries registered a growth rate of 4.3 percent in 2018-19.
India’s ranking improved by 23 to 77th position in 2018 among 190 countries assessed by the World Bank Doing Business (DB) Report, 2019.
Road construction grew @ 30 km per day in 2018-19 compared to 12 km per day in 2014-15.
Rail freight and passenger traffic grew by 5.33 per cent and 0.64 per cent respectively in 2018-19 as compared to 2017-18.
Total telephone connections in India touched 118.34 crore in 2018-19
The installed capacity of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in 2018.
Public Private Partnerships are quintessential for addressing infrastructure gaps
Building sustainable and resilient infrastructure has been given due importance with sector specific flagship programmes such as SAUBHAGYA scheme, PMAY etc
Institutional mechanism is needed to deal with time-bound resolution of disputes in infrastructure sector
10.6 million foreign tourists received in 2018-19 compared to 10.4 million in 2017-18.
Forex earnings from tourism stood at US$ 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.
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 to90% of productivity despite accounting for about 15% by number.
Unshackling MSMEs and enabling them to grow by way of:
Asunset 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 9.7mn per year during 2021-31 and 4.2mn 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.
Enabling Inclusive Growth through Affordable, Reliable and Sustainable Energy
Survey says that efficacy of MGNREGS increased with use of technology in streamlining it.
Significant reduction in delays in the payment of wages with adoption of NeFMS and DBT in MGNREGS.
Demand and supply of work under MGNREGS increased, especially in distressed districts.
Vulnerable sections of the society viz. women, SC and ST workforce increased under MGNREGS during economic distress.
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.
Govt should ease law on firing workers, reform labour laws: Panagariya
Mumbai: India should ease norms for hiring and firing workers to make it easier for companies to do business in the country, according to a former adviser to Prime Minister Narendra Modi’s government.
Easing the rules are crucial for employers, as their primary aim is not to fire workers, Arvind Panagariya, the head of government think-tank NITI Aayog, said in an interview in New Delhi. “You need consistency across labour laws.”
Finance Minister Nirmala Sitharaman, in her maiden budget this month, proposed combining multiple laws governing workers to form four sets of labor codes to improve the ease of doing business. But what’s needed is the reform of labor laws and not just streamlining of existing ones, said Panagariya.
He said the government’s plan to introduce a single minimum wage across the country may hurt businesses in smaller towns considering the wide differences in costs across urban and rural India. It could especially hurt small exporters and erode their competitiveness globally.
Modi’s government, which was re-elected for a second straight five year term in May, can do more to help grow the economy, Panagariya said, adding that some of India’s labor laws are probably more than 100 years old. Almost all of them are more than 30 years old.
Ban cryptocurrencies, consider launching own digital money: Panel to govt
New Delhi: A panel tasked with examining virtual currencies has recommended that the government should ban private cryptocurrencies and could consider launching its own digital money. It has also recommended that to deter the use of private cryptocurrencies, anyone doing so could be punished with imprisonment of up to 10 years.
The committee on virtual currency is headed by Finance Secretary Subhash Garg. The other members are Ajay Prakash Sawhney, secretary, Ministry of Electronics and Information Technology; Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi); and B P Kanungo, deputy governor, Reserve Bank of India (RBI).
The committee submitted its report — after a delay of a year. A piece of draft legislation, Banning of Cryptocurrency and Regulation of Official Digital Currency Bill, 2019, was also put in the public domain.
The Supreme Court is slated to hear a challenge to a ban on cryptocurrencies by the central government and the Reserve Bank of India.
In its report, the committee has recommended that distributed ledger technology (DLT), the most common use of which is blockchain, can be of great benefit to the country in several financial and non-financial areas, such lowering costs of the Know Your Customer process and improving access to credit.
Ban cryptocurrencies, consider launching own digital money: Panel to govt “There is no underlying intrinsic value of private cryptocurrencies. These… lack all the attributes of a currency. There is no fixed nominal value of these private cryptocurrencies. They neither act as any store of value nor they are a medium of exchange,” the panel said in its report, noting that since their inception, cryptocurrencies had demonstrated extreme fluctuations in their prices.
The draft Bill states: “Whoever directly or indirectly mines, generates, holds, sells, deals in, transfers, disposes of or issues cryptocurrency or any combination thereof… shall be punishable with fine or with imprisonment which shall not be less than one year but which may extend up to ten years, or both.”
The panel said policymakers and regulators should have an open mind regarding the introduction of an official digital currency in India. “It may be possible to visualise some models of future official digital currencies but as of date it is unclear whether there is clear advantage in the context of India to come up with an official digital currency.”
The panel also recommended if required, a group can be constituted by the finance ministry’s department of economic affairs, with participation of the representatives of the Reserve Bank of India (RBI), the Ministry of Electronics and Information Technology (MeiTY), and the department of financial services for examination and development of an appropriate model of digital currency in India. If one is launched, the RBI should regulate it.Technology experts, however, were not very happy with the recommendations of the panel.
“The definition of cryptocurrency in the report is reasonably vague and may not cover something like Facebook’s libra or even bitcoin if one were to read it too technically. The drafting needs to be better,” said a lawyer who did not want to be named.Experts said it might be possible to develop a distributed ledger with nodes kept only in India.
“As a venture capitalist, I find… the suggestion of a ban quite disappointing because they did not engage with start-ups or domain experts,” said Nitin Sharma, technology investor and founder, Incrypt Blockchain.
Maruti, Hyundai skip rural slump, manage to increase sales in FY19
Chennai: The country’s largest two carmakers, Maruti and Hyundai, managed to increase their rural sales in 2018-19. This took place despite the rural economy being under pressure.
Both companies are optimistic about 2019-20, too, with the raising of rural allocations in the Union Budget and higher Minimum Support Prices. That means more of rural disposable income.
Maruti Suzuki’s (the country’s largest car maker) rural sales in 2018-19 rose to 205,000 units or 39 per cent of sales. A year before, it was around 165,000 units or 37 per cent of sales. This year’s outcome will depend on the monsoon, farm output and how rural sales pick up.
Hyundai’s rural sales were 17.3 per cent of its FY19 total, as against 15.6 per cent a year before. In FY20, the contribution is expected to be around 20 per cent.
Both companies — they address most of the spectrum — have said they are optimistic on the future, despite the overall industry having slowed. According to the Federation of Automobile Dealers Associations, passenger vehicle sales dropped by 4.6 per cent in FY19, to 224,755 units.
Shashank Srivastava, executive director for marketing and sales at Maruti, estimates growth of 4-8 per cent for the current financial year. However, he adds, a good monsoon and a satisfactory (for sales) festival season would be important, he adds.
With car penetration of around 22 per 1,000 population, India continues to be a big opportunity to sell cars, especially in rural areas. Srivastava says the rate of growth in the rural market has invariably been higher in recent years.
“Today, with booming internet users and a strong millennial population, rural markets are emerging as growth engines for sales,” he says.
Further, rural infrastructure has improved significantly. Motorability has seen sharp improvement there, resulting in exponential increase of two-wheeler sales and offering similar potential for cars.
Vikas Jain, national sales head at Hyundai Motor India, says customers of urban and rural markets might have differing needs but similar aspirations. In the latter, owning a car is a big aspiration.
Urban markets are experimenting with mobility solutions such as subscription and leasing. Hyundai has a partnership with self-drive car rental firm Revv and another with mobility solutions firm ALD Automotive India.
The company believes there is huge aspiration among youth in tier-1 and tier-II cities to own a vehicle. Rising disposable income and the expanding presence of financial institutions in rural markets, to offer credit at attractive rates, will enable ownership of cars.