Economic Survey 2020 projects economic growth at 6-6.5 percent in the fiscal year while this year GDP seen at 5 percent. Survey present in parliament says effect of global slow down seen in Indian economy. The NBFC sector, which has been struggling to stay solvent amid piling rubble of collapsing asset values and growing loan defaults, came out for extra emphasis in the Survey. “Problems faced by the NBFCs stemmed from their over-dependence on short-term wholesale funding from the liquid debt mutual funds,” the Survey said.
The Survey flagged sluggish household spending, embattled non-banking finance companies (NBFCs), a wobbly world economy and lower tax revenue collections as the main pain points that need intensive care. It argued in favour of counter-cyclical fiscal measures to arrest the current slide, which may be seen as a nudge to the government to lower taxes to boost demand. All groups of countries have slowed down and in a globalised economy, India too has felt the effect,”, says CEA.
The Survey notes that the rise in core inflation in December suggests that demand pressure is building. It adds that growth uptick is expected in H2FY20, which makes a “case for the Monetary Policy Committee (MPC) to not respond to a transitory spike in CPI.”
It further sees evidence for “strong revision” of headline CPI to core inflation, and added that “green shoots are present” for growth in FY21, but improving composition, quality of government spending and crucial government steps, including infra pipeline would play a role.
The government is widely expected to relax its fiscal deficit target in the Union Budget, as the economic slowdown lowered revenue collections and the government provided a tax stimulus to spur investments. The fiscal deficit – which is the shortfall in revenue viz-a-viz expenditure – is seen slipping to 3.8 per cent of GDP in 2019-20 against a budgeted 3.3 per cent.
The Economic Survey, prepared by a team headed by the government’s Chief Economic Advisor Krishnamurthy Subramanian also said there is room for rationalising subsidies, especially that on food.
Real estate companies must cut home prices to clear their unsold inventories, according to the Economic Survey, which also said that greater home sales can clear the balance sheets of banks as well as non-banking financial companies.
