Economic Survey 2019-20 highlights: Back to Adam Smith's Invisible Hand

India's aspiration to become a $5 trillion economy depends critically on strengthening the invisible hand of the market, it said. And this needs to be done with the hand of trust through government intervention by facilitating pro-business policies.

India's Economic Survey 2019-20 was tabled in the Parliament on Friday by Finance Minister Nirmala Sitharaman. The survey is usually released a day before the Finance Minister tables the Union Budget in the Parliament.

And it is an official report card on the government's financial performance and the state of the economy during the year ending March 31. It also provides an outlook on future policy changes.

While the 2018-19 survey started with Dr. Richard Thaler's famous 'nudge' principle to effectively implement policies that drive behavioural change, the 2019-20 survey has shifted focus to Adam Smith's 'invisible hand' for wealth creation.

India's aspiration to become a $5 trillion economy depends critically on strengthening the invisible hand of the market, it said. And this needs to be done with the hand of trust through government intervention by facilitating pro-business policies.

Here are the highlights of Economic Survey FY20:

Economy

Amidst a weak environment for global manufacturing, trade and demand, the Indian economy slowed down with GDP growth moderating to 4.8% in H1 of 2019-20, lower than 6.2% in H2 of 2018-19.

A sharp decline in real fixed investment induced by a sluggish growth of real consumption has weighed down GDP growth from H2 of 2018-19 to H1 of 2019-20.

Imports have contracted more sharply than exports in H1 of 2019-20, with easing of crude prices, which has mainly driven the narrowing of Current Account Deficit (CAD).

On the supply side, agricultural growth, though weak, is moderately higher in H1 of 2019-20 than in H2 of 2018-19.

Headline inflation rose from 3.3% in H1 of 2019-20 to 7.4% in December 2019.

Rise in CPI-core and WPI inflation in December 2019 suggests building of demand pressure.

The deceleration in GDP growth can be understood within the framework of a slowing cycle of growth with the financial sector acting as a drag on the real sector.

The National Infrastructure Pipeline presents green shoots for growth in H2 of 2019-20 and 2020-21.

Based on first Advance Estimates of India’s GDP growth for 2019-20 recorded at 5%, an uptick in GDP growth is expected in H2 of 2019-20.

The government must use its strong mandate to deliver expeditiously on reforms, which will enable the economy to strongly rebound in 2020-21

Industry

The industrial sector based on Index of Industrial Production (IIP) registered a growth of 0.6% for 2019-20 (April-November) as compared to 5% during 2018-19 (April-November).

Watch | Budget 2020: Industry expectations

Growth of manufacturing sector was 0.9% during 2019-20 (April-November) as compared to 4.9% during 2018-19 (April-November).

Report of the Task Force on National Infrastructure Pipeline released on 31.12.2019 has projected total infrastructure investment of ₹102 lakh crore during the period FY 2020 to 2025 in India.

Services sector now accounting for around 55% of total size of the economy and GVA growth, two-thirds of total FDI inflows into India and about 38% of total exports.

Export growth remains subdued with external demand weakened by slowdown in global investment, output and heightened trade tensions, notwithstanding resilient service exports.

External debt as at end September, 2019 remains low at 20.1% of GDP.

Agriculture and its allied sectors contribution to national income has gradually declined to 16.5% in 2019-20 from 18.2% in 2014-15.

India’s food management should focus on rationalisation of food subsidy while addressing the challenges of food security, especially of the

most vulnerable sections.

With the implementation of the National Food Security Act from July 2013, the food subsidy bill has increased from 1,13,171.2 crore rupees in 2014-15 to 1,71,127.5 crore rupees in 2018-19.