Economic Survey 2022: Key takeaways from PEA's speech

Principal Economic Adviser (PEA) Sanjeev Sanyal and Chief Economic Advisor (CEA) Dr V Anantha Nageswaran presented the Economic Survey 2022 on Monday. The Survey was also tabled by the Finance Minister in Parliament.

Here are the key takeaways from the PEA's presentation on the Economic Survey:

- There has been a revival in economic activities to pre-pandemic levels in the year 2021-22. Even though the health cost of the second Covid-19 wave was much more severe, the economic cost of it was much milder, Principal Economic Adviser Sanjeev Sanyal said

- GDP is above 1.3 per cent above what it was pre-pandemic in-line with expectations, he added

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- The Economic Survey projects the economy to have grown by 9.2 per cent this year after a contraction of 7.3 per cent in the previous year

- On sector-wise growth, the PEA said that the agriculture sector was least affected by lockdowns of various kinds. This sector grew in even 2020-21 and again in 2021-22. Industrial sector did go through a contraction and is about 4.1 per cent above pre-pandemic levels now. The services sector was the most affected by the lockdowns. It is just a little short of where it was pre-pandemic, he said

- On the total consumption, he said India is just shy of where it was before the pandemic and while government consumption has been reasonably strong but private consumption still lags

- Exports have been a major driver of growth and they are now very significantly above the pre-Covid-19 levels but imports have also been very strong. Overall, GDP is 1.3 per cent above where it was pre-pandemic, Sanyal said

- The financial sector has weathered the pandemic rather well. Banks continue to increase capital adequancy ratio, banks are well-capitalised. In terms of growth, credit has slowed down but has begun to tick up recently. Banking system is in a position to provide capital, he added

Also Read | Here are key highlights of Economic Survey 2021-22

- On capital markets, the PEA said that markets are well mobilised, reflected in the record IPOs. The IPO cultire is not only about teh big corporates but shows a change in risk apetite and animal spirits in the country, particularly visible in the field of startups. New startups in India have mushroomed in the last last 5 years. 555 districts in the country now have at least 1 startup. Startup hubs have shifted in the country and are not concentrated only in some pockets, he added, showing a heatmap of various startup zones

- India's Balance of payments remains in the positive territory and even where Capital flows have been volatile, current acount has been positive and we now have a healthy amount of forex reserves, PEA Sanjeev Sanyal said

- In terms of Inflation, CPI remains in the tolerant band while WPI has popped back up and is in double digit; however there is significant imported inflation especially from energy prices that the country need to be wary of, he said

- On the spike in Tomato and Onion prices, Sanyal said that their analysis has thrown some light on the reason behind these massive spikes. Seasonality is a major issue and a cyclical trend. Irregular components is another factor that causes price upheavals. To counter this, the survey recomments enhancing logistical issues, cold storage facilities etc to smoothen out prices

- A key factor in this year's survey in the introduction of vaccination status as a macroeconomic stability indicator. Sanyal said that India has fared rather well on this front to weather waves of the pandemic

Outlook:

The Survey has projected a fairly robust, real growth at 8-8.5 per cent taking into consideration the following assumptions:

No further debilitating pandemic disruptions

Normal monsoons

Significant withdrawal of liquidity by major banks

Oil prices at $70-75/bbl

Easing of global supply disruptions over time in the next financial year

Reflecting on the IMF forecast, Sanyal exuded confidence that India is looking at a very promising outlook. "India is one of the very few countries, or rather the only one, where the forecast has been increased. Even with the Economic Survey's more conservative forecasts, we would still be the fastest-growing economy," he said, concluding his presentation.

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