Nirmala Sitharaman tables Economic Survey report, calls for sustained 8% growth rate; India forecasts 7% GDP growth

Shifting gears: Private Investment as the Key Driver of Growth, Jobs, Exports and Demand

• Survey states that pathways for trickle-down opened up during the last five years; and benefits of growth and macroeconomic stability reached the bottom of the pyramid.
• Sustained real GDP growth rate of 8% needed for a $5 trillion economy by 2024-25.
• “Virtuous Cycle” of savings, investment and exports catalyzed and supported by a favorable demographic phase required for sustainable growth.
• Private investment- key driverfor demand, capacity, labor productivity, new technology, creative destruction and job creation.
• Survey departs from traditional Anglo-Saxon thinking by viewing the economy as being either in a virtuous or a vicious cycle, and thus never in equilibrium.

Policy for Real People, Not Robots: Leveraging the Behavioral Economics of “Nudge”

• Decisions by real people deviate from impractical robots theorized in classical economics.
• Behavioral economics provides insights to ‘nudge’ people towards desirable behavior.
• Key principles of behavioral economics:
  • Emphasizing the beneficial social norm.
  • Changing the default option.
  • Repeated reinforcements.
• Using insights from behavioral economics to create an aspirational agenda for social change:
• From ‘Beti Baco Beti Padhao’ to ‘BADLAV’ (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi).
• From ‘Swachh Bharat’ to ‘Sundar Bharat’.
• From ‘Give it up” for the LPG subsidy to ‘Think about the Subsidy’.
• From ‘Tax evasion’ to ‘Tax compliance’.

Nourishing Dwarfs to become Giants: Reorienting policies for MSME Growth

• Survey focuses on enabling MSMEs to grow for achieving greater profits, job creation and enhanced productivity.
• Dwarfs (firms with less than 100 workers) despite being more than 10 years old, account for more than 50% of all organized firms in manufacturing by number.
• Contribution of dwarfs to employment is only 14% and to productivity is a mere 8%.
• Large firms (more than 100 employees) account for 75% employment and close to90% of productivity despite accounting for about 15% by number.
• Unshackling MSMEs and enabling them to grow by way of:
  • Asunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.
  • Deregulating labor law restrictions to create significantly more jobs, as evident from Rajasthan.
  • Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
• Survey also focuses on service sectors such as tourism, with high spillover effects on other sectors such as hotel & catering, transport, real estate, entertainment etc., for job creation.

Data “Of the People, By the People, For the People”

• Society’s optimal consumption of data is higher than ever given technological advances in gathering and storage of data.
• As data of societal interest is generated by the people, data can be created as a public good within the legal framework of data privacy.
• Government must intervene in creating data as a public good, especially of the poor and in social sectors.
• Merging the distinct datasets held by the Government already would generate multiple benefits.

Ending Matsyanyaya: How to Ramp up Capacity in the Lower Judiciary

• Delays in contract enforcement and disposal resolution are arguably now the single biggest hurdle to the ease of doing business and higher GDP growth in India.
• Around 87.5 per cent of pending cases are in the District and Subordinate courts.
• 100 per cent clearance rate can be achieved by filling out merely 2279 vacancies in the lower courts and 93 in High Courts.
• States of Uttar Pradesh, Bihar, Odisha and West Bengal need special attention.
• Productivity improvements of 25 percent in lower courts, 4 percent in High Courts and 18 percent in Supreme Court can clear backlog.