India projects economic growth of 11% year-on-year for 2021-22

While the survey forecast a "V-shaped" economic recovery, it also cautioned that it would take at least two years to revert to pre-pandemic gross domestic levels

After a likely 7.7% contraction in India’s economy in the current financial year ending March 31 due to Covid-19, the Economic Survey projected a record expansion of 11% in 2021-22, which has not been seen even in the pre-pandemic era. But it suggested enhanced spending, including on healthcare, substantially, to kick-start the growth process and sustain it.

The historic high growth rate in 2021-22 will, however, be the result of a low base of the preceding year. After a contraction of 7.7%, the size of India’s economy will be reduced to a little over Rs 134 lakh crore in 2020-21 from nearly Rs 146 lakh crore in 2019-20.

An increase in government spending on the healthcare sector — from the current 1% to 2.5-3% of GDP — as envisaged in the National Health Policy 2017 could reduce out-of-pocket expenditure of masses, said the survey prepared in the backdrop of one of the world’s worst global health crises.

It also underlined the need to have a healthcare regulator since a bulk of healthcare falls in the hands of the private sector. It suggested creating agencies to assess the quality of healthcare providers – both doctors and hospitals and patients – as around 74% of outpatient care and 65% of hospitalisation care is provided through the private sector in urban India.

On other key reforms, it said the infrastructure sector will be the key to overall economic growth and macroeconomic stability.

“Basic infrastructure facilities in the country provide the foundation for growth. In the absence of adequate infrastructure, the economy operates at a suboptimal level and remains distant from its potential and frontier growth trajectory.”

It, however, suggested to the government to increase the selling price of foodgrains provided through ration shops to over 80 crore beneficiaries to cut soaring subsidy bills. And it strongly defended the new farm laws, saying they herald new era of market freedom, which can go a long way in improving lives of small and marginal farmers.

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Foodgrains via ration shops are supplied at Rs 3 per kg for rice, Rs 2 per kg for wheat and Rs 1 per kg for coarse grains through public distribution system.

“While it is difficult to reduce the economic cost of food management in view of rising commitment towards food security, there is a need to consider the revision of the central issue of price to reduce the bulging food subsidy bill,” the survey said.

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Chief Economic Advisor K Subramanian, the author of the survey, patted the government for its Covid-19 policy response saying history will judge that as “mature” but said businesses in India, which merely rely on “jugaad” innovation must increase their expenditure on research and development.

He also came down heavily on the way credit rating agencies have rated India and called for overhauling the methodology.

“Never in the history of sovereign credit ratings has the 5th largest economy been rated as the lowest rung of investment-grade (BBB -). India’s fiscal policy must not remain beholden to a noisy, biased measure of India’s fundamentals...,” the CEA said in the survey.

It also suggested creation of a Bare Necessities Index to assess households’ progress on access to bare necessities.