The Economic Survey 2019 predicts a further slow-down in global growth rate with the world output growth falling from 3.8 per cent in 2017 to 3.6 per cent in 2018. The situation becomes more challenging with rising oil prices.
Escalation of US China trade tensions, tighter credit policies in China, and financial tightening alongside the normalisation of monetary policy in the larger advanced economies are the reasons cited by the Survey behind the fall in world output.
While India continues to be the fastest growing major economy in the world, its growth rate fell in 2018-19 at 6.8 per cent, slightly lower than 7.2 per cent in 2017-18. The reason behind the slowdown was lower growth in ‘Agriculture & allied’, ‘Trade, hotel, transport, storage, communication and services related to broadcasting’ and ‘Public administration & defence’ sectors.
On the supply side, lower agricultural prices might have induced the farmers to produce less while on the demand side, a decline in growth of government final consumption, change in stocks and contraction in valuables hit the growth rate.
Apart from these, base effect from high growth a high growth of 8.1 per cent in the Q4 of 2017-18, election related uncertainty in Q4 of last fiscal may have led to 5.8 per cent growth rate.
The Economic Survey also provides a blueprint for India to become $5 trillion economy by 2025. A sustained growth of 8 per cent with investment-driven virtuous cycle will help achieve Prime Minister Modi’s goal. The survey termed Investment the "key driver" of simultaneous growth in demand, jobs, exports and productivity.
Chief Economic Adviser K V Subramanian, on Economic Survey, said that clear vision, strategic blueprint, tactical tools for constant recalibration based on real time data are important to achieve the 5 trillion goal. “Data must be created as a public good of the people, by the people, for the people,” he added.
Freeing Indian MSMEs from shackles that convert them into dwarfs, nudges beyond “narrow rational calculations”, improving enforcement of contracts and dispute resolution are the necessary steps in the direction.
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