Economic panacea: Wealth creation
The Economic Survey 2019-20 has modestly put India's GDP growth at 6-6.5 per cent in the next fiscal year (2020-21) while estimating 5 per cent for the ongoing fiscal year. The Survey explains that the Indian economy's slowdown — GDP growth down to six-year-low of 4.5 per cent in the September quarter — has been partly due to a global slump. It accounts how RBI rate cuts by 135 basis points have made little impact on growth and maintains that government expenditure is necessary for boosting the economy since monetary policies have not been appropriate enough to revive credit demand. With a theme of Wealth Creation, the Survey identifies several drivers for the same — entrepreneurship at grassroots, pro-business policies and assemble in India for the world. Though India's tryst with socialism invariably implies a sceptical outlook towards wealth creation, yet the Survey strives to denote 'ethical wealth creation as a noble human pursuit'. It highlights new firm creation in districts of the country. The Survey quotes Thirukural, Chapter 76, verse 753, to reinforce the need for creating a culture of entrepreneurship at the district levels — "The one who utilises all resources and opportunities at hand is an efficient (entrepreneur) and nothing is impossible for him to achieve." Statistically, new firm creation in India has gone up by 80 per cent from 70,000 in 2014 to 1,24,000 in 2018. Explaining the phenomenon, Chief Economic Advisor KV Subramanian cites that entrepreneurs at the grassroots level help the local economy as "10 per cent new form creation translates into an increase of 1.8 per cent in the GDP growth in the district". The Survey in this regard urges district and state administrators to focus on literacy, education and physical infrastructure to foster entrepreneurship, which would then lead to job as well as wealth creation. The policies enabling ease of doing business and flexible labour regulations will collectively cast a conducive entrepreneurial environment, thereby facilitating new firms at the district level. The Survey perceives wealth creation by markets through increased investments. It identifies the pro-business policies to test the power of competitive markets with equal opportunities for new entrants and fair competition in that regard. It also demotivates government intervention which is a result of undermining markets. The Survey moves to a crucial vision for the country — Assemble in India for the World. India possesses the opportunity to tread a labour-intensive export trajectory, much like China. Assembling in India will put the spotlight on labour-intensive exports and consequently create jobs at a large scale. This trajectory can increase export market share to 3.5 per cent by 2025 and 6 per cent by 2030 and lead to a creation of over 4 crore jobs by 2025 and over 8 crore jobs by 2030. In the backdrop of glaring unemployment, avenue of export-driven employment reinstates hope. The Survey introduces 'Trust' as a public good that enhances with greater use and explains that policies must empower transparency and effective enforcement using data and technology to enhance this public good. Greater trust ensures strong consumer sentiment.
The Economic Survey holds a few direct pointers for the government wherein immediate attention and action can yield massive improvements for the economy. The Survey advises the government to take measures to make it easier to start a new business, register property, pay taxes, enforce contracts, etc. Taking cognisance of the ineffective government hand in the backdrop of hike in onion prices, the Survey advocates restricted government intervention, urging the latter to analyse the situation and then decide if action on its part is necessary for the particular market. While LPG happened in the '90s, fruits of privatisation are yet to be mined in entirety. To this extent, the Survey urges for privatisation in order to boost jobs and wealth after comparing the performances of at least 10 PSBs that were subject to strategic disinvestment. It summarises that aggressive disinvestment can yield higher profits. The Survey highlights how disproportionately under-developed India's banking sector is with respect to its economy with only one bank in the global top 100 list. Accounting for 70 per cent of market share in the Indian banking sector, PSBs must be scaled up efficiently to match the economy. The Survey instructively suggests the creation of Public Sector Banking Network to incorporate Big data, AI and Machine Learning in credit decisions as well as FinTech and Employee Stock Ownership to improve efficiency. In a novel approach, the Survey attempts to quantify a common person's expenditure for a 'Thali' across India — Thalinomics. Data cites that despite a rise in prices this year, thalis have become more affordable in India compared to 2006-07. The Survey, in hindsight, puts wealth creation and pro-business policies as central to achieve the ambition of $5 trillion economy, setting the premise for the decade's first budget to be presented today. While the Survey has hit the crux by stating wealth creation as the economy's main objective, the Budget will throw light on the tools required to tread the path it suggests.
