The latest official estimate of growth is at 5 per cent, down from 6.1 per cent for 2018-19, with gross fixed capital formation also falling to 28.1 per cent of the current GDP, the lowest since 2003-04.
Last year’s Economic Survey, unveiled in July, had projected India’s GDP growth for 2019-20 at 7 per cent, while stating that the political stability from the renewed mandate for the Narendra Modi government would help revive “animal spirits” and “increase investment activity”. That optimism has, of course, not been borne out. The latest official estimate of growth is at 5 per cent, down from 6.1 per cent for 2018-19, with gross fixed capital formation also falling to 28.1 per cent of the current GDP, the lowest since 2003-04. Not for nothing, there is a recalibration of expectations in the Survey tabled in Parliament on Friday. The Finance Ministry’s latest flagship annual document sees the economy growing by 6-6.5 per cent in 2020-21, while emphasising risks both on the downside (continued global trade conflicts, crude prices rising from escalating US-Iran tensions, widening fiscal deficits causing bond yields to go up) and upside (the September corporate tax rate cuts beginning to attract manufacturing investments, merger of public sector banks leading to increased financial strength and reduced risk aversion).
The above reassessment in the light of reality is welcome. So is a tempering of ambition. Thus, in place of Make in India, a pet scheme of the Modi 1.0 government that did not quite take off, the Survey talks of “assemble in India for the world”. China’s attraction as a low-cost location for assembly of manufactured products has faded with rising wages and labour shortages. The US-China trade war has given further impetus to this process, wherein global producers are actively looking to relocate. India can and should grab that space. Instead of seeking to make everything from scratch, a more sensible strategy would be to import components and assemble them for the world market, as China did. The Survey is not being unrealistic in targeting doubling India’s share in global exports to about 3.5 per cent by 2025 and 6 per cent by 2030, which would also help create four crore to eight crore new jobs.
The other refreshing part about the Survey is its unapologetic defense of wealth creation. The invoking of Arthashastra and Thirukkural to commend accumulation of money is, perhaps, a signal aimed equally at assuaging the business community and making the Swadeshi lobby see reason. Coming after the prime minister’s own Independence Day address extolling the role of wealth creators and not viewing them with suspicion, it hopefully reflects a shift in approach from the earlier obsession with not being perceived as a “suit-boot ki sarkar”. The latest Survey is the first one having an explicit quote from Margaret Thatcher on the virtues of privatisation and free enterprise. The first test of whether that spirit will extend to actual policymaking will come in the Budget.
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