The Economic Survey is the flagship annual document of the finance ministry. It reviews the economic development in India over the past financial year by giving detailed statistical data of all the sectors-industrial, agricultural, manufacturing among others. Besides, it analyses the whole macroeconomics of the country in the past year and provides an outline for the next financial year.
The first Economic Survey of India
The first Economic Survey in India was presented in the year 1950-51. Up to 1964, it was presented along with the Union Budget. From 1964 onwards, it has been delinked from the Budget.
When and who presents the Economic Survey?
The Economic Survey is presented every year in the Parliament during the Budget Session. The Economic Survey is presented normally a day before the presentation of the Union Budget in the Parliament by the Finance Minister.
The Economic Survey is prepared by the Economics Division of the Department of Economic Affairs in the Finance Ministry under the overall guidance of the chief economic adviser and is released after it is approved by the finance minister.
Why is the Economic Survey presented before the Budget?
Since the Economic Survey analyses the overall performance of the economy during the year, so therefore it helps in providing a better understanding of the Union Budget. It essentially helps to understand the priority of the country for the next financial year and what sectors would need more focus in the Union Budget. The survey was de-linked from the Budget in 1964 and circulated in advance so that a context of the Budget can be provided.
Economic Survey 2020-21: Highlights
The Ministry of Finance presented the Economic Survey 2020-2021 that details the state of the economy ahead of the government’s budget for the fiscal year 2021-22. The Economic Survey 2020-2021, authored by a team led by chief economic adviser (CEA) Krishnamurthy V Subramanian, focused on the state of different sectors of the economy, the effect of the coronavirus pandemic as well as reforms that need to be taken.
- The Economic Survey has batted for a continued expansionary fiscal stance by the government to ensure that growth returns to pre-Covid levels. A recovery in growth will boost revenue collections and help India get back on a sustainable fiscal path, it said.
- A rebound in economic activity and the government’s reforms can help the Indian economy go past its pre-Covid level in two years, the survey said. Further upside is also possible if economic activities normalise sooner due to the vaccine rollout.
- The survey tried to cast away doubts about India’s debt levels saying that as long as GDP keeps growing, the country won’t have to worry about debt. The survey argues that over the last two-and-a-half decades, higher GDP growth causes the ratio of debt-to-GDP to decline in the case of India. The reverse, however, is not true, it said.
- There is a need for a fresh asset quality review of Indian banks as soon as the Covid-19 relief measures are lifted, the survey suggested. The chief economic adviser called for a clean-up of bank books to ensure mistakes of the past aren’t repeated.
- The survey has suggested that a greater focus on core inflation is warranted to drive policy-making. It said that the sole focus on CPI inflation to set monetary policy may not be appropriate for four reasons i.e.,
- Food inflation, which contributes significantly to CPI, is driven primarily by supply-side factors.
- Given its role as the headline target for monetary policy, changes in CPI anchor inflation expectations. This occurs despite inflation in CPI being driven by supply side factors that drive food inflation.
- Several components of food inflation are transitory with wide variations within the food and beverages group.
- While food habits have undergone revisions over the decade since 2011-12, which is the CPI base year, the same is not reflected in the index yet. The base year of CPI therefore needs to be revised to overcome the measurement error that may be arising from the change in food habits.
- The Economic Survey has said that the new farm laws, which are being widely opposed by farmer groups, will be beneficial for small and marginal farmers and herald Indian agriculture in a new free-market era.
- More than lack of compliance or regulatory standards, India’s administrative process is suffering from overregulation, the survey noted. The root case of this is the government’s approach that attempts to account for every possible outcome, it said.
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