Daily Current Capsules 01^st February 2022

Budget Session of the Parliament 2022
Economic Survey 2021 -22
 

 

What's the NEWS

• The Economic Survey 2021-22 was tabled in Parliament by Finance Minister Nirmala Sitharaman soon after the President's address to both Houses of Parliament.
• The survey, presented a day before the Union Budget, underlines the state of the economy and outlines suggestions for policy actions.

Highlights (Prelims Pointers)

• India sees 8-8.5% GDP growth in FY23
• Projects 2021-22 real GDP growth at 9.2%
• Projection comparable with World Bank 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.
• As per IMF's latest World Economic Outlook projections, India's real GDP projected to grow at 9 per cent in 2021-22 and 2022-23 and at 7.1 per cent in 2023-2024, which would make India the fastest-growing major economy in the world for all 3years.
• Agriculture least hit by pandemic, sector to grow by 3.9% in 2021-22 after growing 3.6% the previous year
• Crop diversification towards oilseeds, pulses and horticulture needs to be given priority
• Industrial sector likely to grow at 11.8%.
• Survey pegs services sector to see 8.2% growth in 2021-22
• Expenditure on social services rises by 9.8% to Rs 71.61 lakh crore in FY22
• Government consumption is estimated to grow by a strong 7.6% surpassing pre-pandemic levels.
• India's total exports are expected to grow by 16.5% in 2021-22 surpassing pre-pandemic levels.
• Imports are expected to grow by 29.4% in 2021-22
• Consumption has grown 7% in 2021-22 with a significant chunk of to government spending.
• India has third largest startup ecosystem in the world after US and China.
• Delhi saw 5,000 new startups versus 4,514 in Bengaluru between April 2019 and December 2021
• India sees 44 unicorns in 2021, a new record.
• Forex, low current account deficit and capital inflows keeping external sector well supported
• Share of individual investors in total NSE turnover increases to 44.7%
• 221 lakh individual Demat accounts added between April-November 2021
• UPI takes centre stage, with the country seeing 4.6 billion transactions worth Rs 8.26 lakh crore in December 2021 alone
• Rate transmission has been higher in public sector banks than in private sector banks in the current monetary easing cycle
• Five sectors capture around 83% of the aggregate pipeline value: Roads (27%), Railways (25%), Power (15%), Oil & Gas pipelines (8%) and Telecom (6%)
• Government's spending on Social Services increased significantly during the pandemic An increase of 9.8% has been made in the expenditure allocation to the Social Services sector in 2021-22 over 2020-21
• Expenditure on health sector increased from Rs. 2.73 lakh crore in 2019-20 to Rs. 4.72 lakh crore in 2021-22 (BE), an increase of nearly 73%.
• For the education sector, increase during the same period was 20%
• India's external trade recovers strongly in 2021-22 India was the fourth-largest forex reserves holder in the world after China, Japan, and Switzerland: Economic Survey 2022.
• On demand side, consumption estimated to grow by 7.0 per cent, Gross Fixed Capital Formation (GFCF) by 15 per cent, exports by 16.5 per cent and imports by 29.4 per cent in 2021-22.
• Macroeconomic stability indicators suggest that the Indian Economy is well placed to take on the challenges of 2022-23.
• Combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide adequate buffer against possible global liquidity tapering in 2022-23.

Economic Survey for Financial Year 2021-22 - Highlights (Mains Perspective)

• The Economic Survey for FY 2021-22, as tabled in the Parliament today by Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman

NITI Aayog SDG India Index & Dashboard

• India has progressed on the fulfillment of Sustainable Development Goals(SDGs)through improvement in score of NITI Aayog SDG India Index & Dashboard to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19.
• The Economic Survey for FY 2021-22, mentions this achievement and reiterates India's commitment towards achieving social, economic and environmental goals under SDGs.

India's progress on Sustainable Development Goals
The Survey makes the following observations w.r.t performance of States and UTs on the NITI Aayog SDG India Index, 2021:

1. Number of Front Runners (scoring 65-99) has increased to 22 states and UTs in 2020-21 from 10 in 2019-20
2. Kerala and Chandigarh being the top state and UT
3. 64 districts were Front Runners and 39 districts were Performers in North East India (North-Eastern Region District SDG Index 2021-22)

State of the Environment
Land Forests

• India has increased its forest area significantly over the past decade and now ranks third globally in average annual net gain in forest area between 2010 to 2020.
• India's forest cover has increased by more than three per cent during 2011 to 2021, mainly attributed to increase in very dense forest, growing by 20 per cent during the period.

Plastic Waste Management and Single Use Plastics

• India has adopted a resolution on "Addressing Single Use Plastic Product Pollution" at United Nations Environment Assembly held in 2019.
• Plastic Waste Management Amendment Rules, 2021was notified, which aims at this phasing-out of single use plastic.
• The draft regulation on the Extended Producer Responsibility for plastic packaging has also been notified

Water

• The Survey mentions the finding that over-exploitation of ground water resources is concentrated in north-west and parts of southern India.

Air

• National Clean Air Programme (NCAP) was launched by the Govt. of India with a target to achieve 20-30 per cent reduction in particulate matter (PM) concentrations by 2024 across the country.
• The programme is being implemented across 132 cities.

India and Climate Change

• India had announced its first Nationally Determined Contribution (NDC) under the Paris Agreement in 2015 and in 2021 announced ambitious targets to be achieved by 2030 to enable further reduction in emissions.
• 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, has also been underlined by the Survey document.
• The Survey mentions that India has been 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).

Service Sector

• Services Sector contributed over 50% to India's GDP, highlighted the Economic Survey 2021-22
• Services Sector registered a steady recovery during the first half of the current fiscal year.
• Overall, the Services Sector grew by 10.8% Year on Year (YoY) in first half (H1) 2021-22
• The overall Services sector GVA is expected to grow by 8.2 per cent in 2021-22
  

FDI In Services

• Services Sector was the largest recipient of FDI inflows in India.
• Services Sector received $ 16.73 billion FDI equity inflows
• Financial, Business, Outsourcing, R&D, Courier, Tech testing & Analysis along with Education sub sector witnessed strong FDI inflows

Trade In Services

• It remained among the top ten services exporter countries in 2020, with its share in world commercial services exports increasing to 4.1% in 2020 from 3.4% in 2019.
• The impact of Covid-19 induced global lockdown on India's services exports was less severe as compared to merchandise exports
• Double digit growth in gross exports of services, aided by exports of software, business and transportation services, resulted in an increase of 22.8% in net exports of services in H1 2021-22.

Sub-Sector Wise Performance
IT-BPM (Information technology - Business Process Management) Sector

• IT-BPM revenues (excluding e-commerce) reached $ 194 billion, growing by 2.26% YoY, adding 1.38 lakh employees.
• The Survey further noted that within the IT-BPM sector, IT services constitutes the majority share (>51%).

Startups and Patents

• More than 61,400 startups have been recognized in India as of January 10, 2022.
• India had a record number of Startups (44) reaching unicorn status in 2021.
• The number of patents filed in India has gone up to 58,502 in 2020-21 from 39,400 in 2010-11 and the patents granted in India has gone up to 28,391 from 7,509 during the same period"

Tourism Sector

• The Covid-19 pandemic had a debilitating impact on world travel and tourism everywhere, including India.

Ports, Shipping and Waterways Services

• Ports handled around 90% of export-import cargo by volume and 70% by the value.
• The Port traffic had picked up in 2021-22 registering a growth of 10.16% during April-November 2021, after hit by disruptions caused by Covid-19 in 2020-21.
• The Survey also mentioned the Sagarmala Programme, a flagship programme, aimed at promoting port-led development in the country with 802 projects worth Rs. 5.53 lakh crore under its ambit.

Space Sector

• The Survey noted that the Government undertook various reforms in space sector in 2020, envisaging participation of the private sector in providing space-based services.
• These reforms included empowering New Space India Limited (NSIL) and changing the present supply-based model to demand-driven model; creating an independent nodal agency i.e. Indian National Space Promotion and Authorization Centre (IN-SPACe) under the Department of Space; and providing a predictable, forward-looking, well defined and enabling regulatory regime for space activities in the country.

Industrial Growth

• Global Industrial activity continued to be affected by the disruptions caused by the Covid-19 pandemic.
• The industrial performance has shown improvement as reflected in the cumulative growth of Index of Industrial Production (IIP).
• During April-November 2021-22 the IIP grew at 17.4 percent as compared to (-) 15.3 percent in April-November 2020-21.

• The Economic Survey says the introduction of the production linked incentive scheme (PLI) to encourage scaling up of industries and major boost provided to infrastructure-both physical as well as digital-combined with continued measures to reduce transaction costs and improve ease of doing business, would support the pace of recovery.
• Several initiatives such as National Infrastructure Pipeline (NIP), National Monetization Plan (NMP), amongst others, have been taken to propel the infrastructure investment.
• Capital expenditure for the Indian Railways has been substantially increased
• The extent of road construction per day increased substantially in 2020-21 to 36.5 kms per day from 28 kms per day in 2019-20

Index of Industrial Production (IIP)

• The IIP provides data for 23 subgroups of the manufacturing sector.
• In the period, April-November 2021-22, all the 23 sectors recorded a positive growth.
• The major industrial groups like textiles, wearing apparel, electrical equipment, motor vehicle staged a strong recovery.
• Improvement in the performance of textiles and wearing apparel which is a labor-intensive industry has significant implication for employment creation.

Eight Core Index (ICI)

• The growth rate of ICI index during the period of April-November 2021-22 was 13.7 percent as compared to (-) 11.1 percent in the corresponding period of last financial year.
• This acceleration in ICI is mainly driven by improved performance in the steel, cement, natural gas, coal and electricity.
• The Index of eight core industries has shown a pickup in growth in almost all its components barring crude oil and fertilizers in 2021-22 (April-November) as compared to 2019-20 (April-November).
• The steel, crude oil, fertilizer, electricity, natural gas recovered as compared to February 2020 level.
• In addition, the value of Index for steel, fertilizers, electricity, natural gas and coal is higher than the pre-lockdown level (November 2019).

FDI in Industries

• FDI inflows in India stood at US$ 45.14 billion in 2014-15 and have continuously increased since then.
• India registered its highest ever annual FDI inflow of US$ 81.97 billion (provisional) in the 2020-21 reflecting the growth of 10 percent as compared to the previous year.
• Over the last seven financial years (2014-21), India received FDI inflow worth US$ 440.27 billion which is nearly 58 percent of the FDI received by the country in the last 21 years (US$ 763.83 billion).

 

 

SECTOR WISE PERFORMANCE AND ISSUES IN INDUSTRY
Steel

• Despite being hit by COVID-19, the steel industry has bounced back with cumulative production of crude and finished steel in 2021-22 (April-October) at 66.91 MT and 62.37 MT, an increase of 25.0 percent and 28.9 percent respectively

Coal

• Coal production increased by 12.24 percent in April-October 2021 as compared to (-) 3.91 percent in April-October 2020.

Micro Small Medium Enterprise

• The share of MSME GVA in total GVA (current prices) for 2019-20 was 33.08 percent.
• The Government has taken various initiatives to nurture and promote the MSMEs :
• The revision in the definition of MSMEs brought in w.e.f 1st July 2020
• Launch of the Udyam Registration Portal in July 2020 by the Government to improve the ease of doing business for the MSMEs

Textiles

• It has shown a remarkable recovery with positive contribution to growth as reflected by IIP, of 3.6 percent during April-October 2020.
• To enhance the competitiveness of the sector, the Government notified the setting up of 7 PM MEGA INTEGRATED TEXTILES REGION AND APPRAEL PARK (MITRA) in October with a total outlay of Rs. 4,445 crore.
• PM MITRA inspired from 5F's- farm to fibre; fibre to factory; factory to fashion; fashion to foreign- will strengthen the textile sector by developing integrated large scale and modern infrastructure facility for entire value chain of the textile industry.

Electronics Industry

• The Government has notified the National Policy on Electronics 2019 (NPE-2019) on 25.02.2019 to position India as a global hub for Electronics System Design and Manufacturing (ESDM) by encouraging and driving capabilities in the country for developing core components, including chip sets.
• Recently, the Government has approved an outlay of Rs. 76,000 crore (>US$ 10 Bn) for the development of Semiconductor and Display Manufacturing Ecosystem.

Pharmaceuticals

• Indian Pharmaceuticals industry ranks 3rd in the world in pharmaceuticals production by volume.
• India is largest supplier of generic medicines with a 20 percent share in the global supply making the country the "Pharmacy of the world"
• FDI in Pharmaceuticals Sector has seen a sudden spurt in 2020-21 vis a vis the previous year showing a 200 percent increase.

INFRASTRUCTURE

National Infrastructure Pipeline (NIP)

• Public Private Partnership in Infrastructure has been an important source of investment in the sector.
• As per the database of the World Bank on private participation in infrastructure, India is ranked second among developing countries both by the number of PPP Projects as well as the associated investments.
• The Public Private Partnership Appraisal Committee (PPPAC) which is responsible for the appraisal of PPP projects has cleared 66 projects with a total project cost of Rs 137218 crores from 2014-15 to 2020-21.
• The government launched viability Gap Funding (VGF) scheme for providing financial assistance to financially unviable but socially / economically desirable PPP projects, Up to 20 percent of the project cost is funded under this scheme as a grant.
• In order to achieve the GDP of $5 Trillion by 2024-25, India needs to spend about $1.4 trillion over these years on infrastructure.
• Keeping this objective in view, National Infrastructure Pipeline (NIP) was launched with projected infrastructure investment of around 111 lakh crore (US$ 1.5 Trillion) during 2020-2025 to provide world- class infrastructure across the country.
• NIP was launched with 6, 835 projects, which has expanded to over 9,000 projects covering 34 infrastructure sub-sectors.

National Monetization Pipeline (NMP)

• A robust asset pipeline, NMP has been prepared to provide a comprehensive view to investors and developers of the investment avenues in Infrastructure.
• Total indicative value of NMP for core assets of the Central Government has been estimated at Rs. 6.0 lakh crore over the 4-year period (5.4 percent of total infrastructure investment envisaged under NIP).

Road Transport

• There has been a consistent increase in the construction of National Highways/Roads since 2013-14 with13,327 kms of roads constructed in 2020-21 as compared to 10,237 kms in 2019-20, indicating an increase of 30.2 percent over the previous year

Railways

• In Railways, an average of 1835 track km per year of new track length has been added through new-line and multi-tracking projects during 2014-2021 as compared to the average of 720 tracks kms per day during 2009-14.
• Indian Railways (IR) is adopting indigenous new technology such as KAVACH, Vande Bharat trains and redevelopment of stations to have a safe and better journey experience.

Civil Aviation

• The domestic traffic in India has more than doubled from around 61 million in 2013-14 to around 137 million in 2019-20, registering a growth of over 14 percent per annum.

Initiatives to boost the aviation sector

• introduction of air transport bubbles
• disinvestment of Air India
• privatization and modernization/expansion of airports,
• boost to the regional connectivity scheme- UDAN,
• incentivization of maintenance, repair and overhaul (MROs) operations etc.
• Government has liberalized Drone Rules 2021 on August 2021 and released PLI scheme for drones on 15 September 2021.
• The policy reforms will therefore catalyze super-normal growth in the upcoming drone sector.

Ports

• The capacity of 13 major ports which was 871.52 million tonnes per annum (MTPA) at the end of the March 2014, has increased by 79 percent to 1,560.61 MTPA by the end of the March 2021.
• Maritime India Vision 2030 (MIV 2030), a blueprint to ensure coordinated and accelerated growth of India's maritime sector in the next decade was released on March 2021.
• MIV 2030 estimates that development of Indian Ports will drive cost savings of Rs 6,000-7,000 crore per annum for EXIM clients.

Inland Waterways

• Regulatory amendment through the Inland Vessels Act, 2021 replaced the over 100 years old Inland Vessels Act, 1917 (1 of 1917) and ushered in a new era in the inland water transport sector.

Telecom

• India is the world's second-largest telecommunications market.
• In March 2021, 45 percent of subscribers were based in rural India and 55 percent in urban areas.
• Internet penetration in the country is increasing steadily with internet subscribers increasing from 302.33 million in March 2015 to 833.71 million in June 2021.
• Under the flagship BharatNet project, 5.46 lakh km Optical Fiber Cable has been laid, a total of 1.73 lakh Gram Panchayats (GP) have been connected by Optical Fiber Cable (OFC) and 1.59 lakh Gram Panchayats are service ready on OFC.
• Government is implementing a Comprehensive Telecom Development Plan (CTDP) for the North-Eastern Region and Comprehensive Telecom Development Plan for Islands to provide mobile connectivity in the uncovered villages and along National Highways in the North-East.

Petroleum, Crude and Natural gas

• The Government has introduced several measures to bring transparency. The "Lakshya Bharat Portal" launched in September, 2021 requires all oil and gas organization to upload details of various items procured by them including the future requirements.
• The second phase of the Pradhan Mantri Ujjwala Yojna, Ujjawala 2.0, was launched on 10th August, 2021 on pan India basis to provide additional on crore LPG connections along with free first refill and stove.
• Ujjwala 2.0 focuses on migrants and poor women form low LPG coverage areas.

Renewable Energy

• In order to facilitate renewable power evacuation and reshaping the grid for future requirements, the Green Energy Corridor (GEC) projects have been initiated.
• The second component -Intra-state GEC with a target capacity of 9700 ckm transmission lines and 22,600 MVA capacity sub-stations is expected to be completed by June 2022.

Inflation

• The retail inflation, as measured by Consumer Price Index-Combined (CPI-C) moderates to 5.2% in 2021-22 (April-December) from 6.6% in the corresponding period of 2020-21

Domestic Inflation:

• Consumer Price Index - Combined (CPI-C) inflation in India has remained range bound in the recent months, touching 5.2% in December 2021.

Global Inflation:

• The Economic Survey says that in 2021, inflation picked up globally as economic activity revived with opening up of economies.
• Inflation surged from 0.7 % in 2020 to around 3.1 % in 2021 in the advanced economies.

Recent Trends in Retail Inflation:

• Retail inflation, well within the target limits of 2% to 6%, declined to 5.2% as against 6.6% during April - December 2020-21.
• Food inflation, as measured by the Consumer Food Price Index (CFPI), averaged at a low of 2.9% in 2021-22 (April-December) as against 9.1% in the corresponding period last year.
• The Survey says that a "refined" Core inflation has been constructed to exclude the volatile fuel items.
• The items of "petrol for vehicle" and "diesel for vehicle" and "lubricants & other fuels for vehicles", in addition to "food and beverages" and "fuel and light" have been excluded from headline retail inflation.
• Since June 2020, refined core inflation has been much below the conventional core inflation, indicating the impact of inflation in fuel items in the "conventional" core inflation measure.

Drivers of Retail Inflation:

• Major drivers of retail inflation have been "miscellaneous" and "fuel & light" group.
• According to the Survey, within miscellaneous group, subgroup of "transport and Communication" contributed the most, followed by "health".
• On the other hand, contribution of food & beverages declined from 59% to 31.9%.

"Fuel & light" and "Transport & Communication":

• Inflation in the above two groups for the period of 2021-22 (April - December) has been largely due to the high international crude oil, petroleum product prices and higher taxes.

Miscellaneous:

• The Survey expresses that apart from transport & communication; "clothing and footwear" inflation also saw a rising trend during the current financial year possibly indicating higher production and input costs (including imported inputs) as well as due to revival of consumer demand.

Food and beverages:

• Oils and fats contributed around 60% of "food and beverages" inflation despite having a weight of only 7.8% in the group.
• The demand for edible oils is largely met through imports (60%) and fluctuations in international prices have been responsible for the high inflation in this sub group.
• Though India's imports of edible oils have been the lowest in last six years, in terms of value, it has increased by 63.5% in 2020-21 as compared to 2019-20.
• Inflation in pulses declined to 2.4% in December 2021from 16.4% in 2020-21.With an increase in area sown for kharif pulses to a new high of 142.4 lakh hectare (as on 1st October 2021) pulses inflation is on a downward trajectory.

Rural - Urban inflation differential:

• The gap between rural and urban CPI inflation declined in 2020 as compared to the higher gaps witnessed from July 2018 to December 2019.
• The factor largely responsible for divergence, for brief time periods, is the component of food and beverages.

Trends in Wholesale Price Index based Inflation:

• WPI inflation has shown an increasing trend and has remained high during the current financial year touching 12.5% during 2021-22 (April - December).
• The Survey describes that part of the high inflation could be because of a low base in the previous year as WPI inflation has been benign during 2020-21.
• The Survey observes that Crude petroleum & natural gas sub group under WPI has witnessed very high inflation and stood at 55.7% in December 2021. Within manufactured food products, edible oils were a major contributor.

Agriculture

• Agriculture sector which accounts for 18.8% of Gross Value Added of the country in 2021-22 has experienced buoyant growth in the past 2 years.
• It grew at 3.9% in 2021-22 and 3.6% in 2020-21 showing resilience in the face of COVID19

• To promote water use efficiency and sustainable agriculture and ensure higher incomes to farmers, the Government is implementing Crop Diversification Programme.

Other Highlights

Know! about Economic Survey

• The Economic Survey is released a day before the Union Budget is presented in Parliament.
• This year, Finance Minister Nirmala Sitharaman will present the Budget 2022 in Parliament on February 1.
• However, this year the Economic Survey is being prepared by the Principal Economic Advisor and other officials in absence of the Chief Economic Advisor (CEA).
• The previous CEA KV Subramanian had completed his three-year term as CEA on December 6 last year.
• The Survey is 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).
• It is only released after it is approved by the FM.

What is the Economic Survey?

• The Economic Survey is an annual financial document that reviews the economic development in India over the past financial year by analysing and providing detailed statistical data of all the sectors-industrial, agricultural, industrial production, employment, prices, exports, among others.
• It also analyses trends in other factors that have an impact on the Indian economy such as money supply and foreign exchange reserves.
• The Economic Survey had two volumes in the last few years - the first volume primarily outlines the challenges that India's economy faces and the second volume gives a broad-based review of the financial year.
• The Economic Survey also outlines the key schemes run by the government. It also provides details about the outcomes of major policies.

Agile Approach

• The central theme of Economic Survey 2021-22 is the "Agile Approach".

• Barbell Strategy - combining safety nets for vulnerable sections and iterative updating of strategy based on high-frequency data, leading to agile approach

Shape of economic recovery is tilted W

• The Indian industry sector saw a graph of downfall, and revival during the pandemic phase.
• Sectors went through contractions and revivals
• If we go through the quarterly data, (we will see) downturn, sharp downturn, revival, shallow downturn, and flatter, more sustained revival.

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