Survey shows path to dawn of growth era?

A boost for private investment and focus on medium and small enterprises as key drivers of growth and new jobs is a timely nudge to the government in Economic Survey 2019. The survey, presented to Parliament on Thursday by finance minister Nirmala Sitharaman, is a report card on the economy for the year gone by, and suggests that while going forward, political stability should push the “animal spirits” required to meet the challenges of slow growth, employment creation, labour productivity and constraints in the implementation of GST. Interestingly, the survey comes when the country has seen the lowest employment rate in 46 years, and private investment has been languishing for various reasons, including political uncertainty before the recent elections. These faultlines are expected to be addressed in the Budget on Friday. The government’s capital expenditure, which has hitherto been primarily in the infrastructure sector and helped to create employment, has been falling in recent quarters as it strives to maintain the fiscal deficit target. It is therefore imperative that the private sector steps in with investments that would lead to the creation of jobs and employment opportunities. It is noteworthy that some analysts say the government should spend on infrastructure rather than recapitalising the public sector banks. The latter only means good money chasing bad money. It is expected the Union Budget will offer some impetus to the private sector to encourage investment, and offer new technologies that could raise productivity and create jobs, that in turn could put purchasing power in the hands of the people and push up demand.

One of the survey’s significant suggestions is the need to rationalise minimum wages for different categories in the unorganised sector, while also increasing the wages of farm labour in order to alleviate poverty and bring these sections within the economic mainstream. This is needed and is welcome as rural distress has been one of the blots on Prime Minister Narendra Modi’s first term record.

The survey’s stress on strengthening MSMEs is not misplaced and is vital as they are the job creators. It is heartening to note that the survey sees green shoots in investment activity, though it simultaneously warns that the investment rate is diminishing. This is not a good omen, and the Budget will hopefully provide a remedy for this situation.

There has also been a slowdown in agriculture and its share in GDP has been declining. The survey calls for the need to take measures to integrate women as active agents in rural transformation. It cautions that unless this is done, farm distress and social unrest could cause socio-political upheavals. Agriculture, as is well known, contributes 16 per cent to GDP and 49 per cent of jobs.

The Budget on Friday is awaited with much excitement as it will be finance minister Nirmala Sitharaman’s maiden one. Could her Budget herald the dawn of a much-needed new economic era?