Economic Survey 2021-22: Fiscal space may allow capital expenditure push

The 2021-22, penned by Principal Economic Advisor Sanjeev Sanyal and his team at North Block, not only did away with one of the volumes started by former chief economic advisor Arvind Subramanian, but was also bereft of any big-bang ideas for the government.

It is not that ideas given in the earlier Economic Surveys, such as the Jan Dhan-Aadhaar-Mobile (JAM) trinity, universal basic income, and printing more money, were all accepted by the government, but those did stir debates on policymaking.

However, a day ahead of the Union Budget for 2022-23, the Survey said the government had the fiscal space to ramp up capital spending. It said private investment recovery was still at a nascent stage. In the same vein, it also said there were signals such as the number of private investment projects under implementation in the manufacturing sector and companies hitting record profits in recent quarters, which indicated India was poised for stronger investment.

Even for the current fiscal year, the strong revival in revenues means that the government has the fiscal space to provide additional support if necessary, the Survey highlighted.


Revenue receipts were up more than 67 per cent in the first eight months of FY22 over the previous one. The government has Parliament’s nod for additional net spending of over Rs 3 trillion but most of it is for revenue expenditure.

Against various commentaries on subdued domestic demand, the Survey highlighted government consumption was estimated to grow by 7.6 per cent, surpassing pre-Covid levels, in FY22. Besides, private consumption is estimated to have improved significantly to recover 97 per cent of the corresponding pre-pandemic output level.

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The Survey laid importance on the use of new forms of data and activities such as the vaccination drive, high-frequency data, and satellite images for “real-time management of the economy through uncertain times”. Through these indicators, it suggested the Indian economy was well-placed to take on the challenges of 2022-23.

As such, it estimated economic growth in the range of 8-8.5 per cent during 2022-23. This would mean a fairly robust rate after two financial years were marred by Covid-19. Though the advance estimates project the economy to grow by 9.2 per cent in the current fiscal year, it would mean just 1.3 per cent growth over the pre-Covid 2019-20. The new gross domestic product (GDP) data put out on Monday would mean economic growth of 8.8 per cent for 2021-22, which would translate into 1.6 per cent growth over pre-Covid 2019-20.

The lower range of the projection would mean a 9.7 per cent growth rate in the next fiscal year over 2019-20 and the upper range would deliver a 10.3 per cent growth rate.

Combining the Survey’s projection for 2022-23 with the International Monetary Fund’s projection for economic growth at 7.1 per cent for 2023-24, India’s economy would be the fastest-growing large economy in the world for three years in running — 2021-22, 2022-23, and 2023-24 — the mark that was snatched from her even during the pre-Covid year of 2019-20.

However, Economic Surveys have grossly overestimated growth in recent times. Hence, this Survey added a caveat to its projection that it was based on the assumption that there would be no further debilitating pandemic-related economic disruption, the monsoon will be normal, the withdrawal of global liquidity by major central banks would be broadly orderly, oil prices would be in the range of $70-75 a barrel, and global supply chain disruptions would steadily ease over the course of the year.

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The Survey highlighted the distinguishing feature of the government’s response to Covid-19 had been emphasis on supply-side reforms rather than complete dependence on demand management. These supply-side reforms, it said, include deregulating numerous sectors, simplifying processes, removing legacy issues like “retrospective tax”, privatisation amd production-linked incentives.

Though the Survey said retail price inflation was within the targeted tolerance band and double-digit wholesale price inflation would peter out as the base effect normalised, it cautioned against imported inflation, especially from elevated energy prices.

It laid stress on better storage and supply chain management to ensure the availability of essential commodities in the lean season and reduced wastages of horticulture and other perishables to reduce seasonal spikes in prices for consumers as well as the glut for farmers in times of good harvest.

As for the second year running the Survey was written under the cloud of the pandemic, it explained the “Agile” approach, which informed the government’s response to the Covid-19 shock.

This framework is based on feedback loops, real-time monitoring of outcomes, flexible responses, safety-net buffers, etc.

The approach is different from the default mode of policy-making in India and most of the world, which traditionally relies on a pre-determined “waterfall” approach — an upfront analysis of the issue, detailed planning, and finally meticulous implementation, the Survey argued.


On fears of capital outflow due to tapering by central banks in advanced countries, the Survey took comfort from the combination of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings, saying these will provide an adequate buffer.

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However, the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of Covid-19 with new variants, may pose a challenge for India’s external sector during 2022-23, it warned.

Even as the Survey highlighted the resilience of agriculture during Covid waves, it suggested improving the productivity of small and marginal farmers.

The Survey also called for reducing delays in processes for a voluntary liquidation of companies, increasing use of alternative sources of energy, and expediting approval for patents.

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