Topic: Key points of Economic Survey 2018-19
Topic in Syllabus: Indian Economy
- The Economic Survey is prepared by the Economic Division of the Department of Economic Affairs in the Finance Ministry under the overall guidance of the Chief Economic Adviser.
- The survey was de-linked from the Budget in the year 1964 and is circulated in advance to provide the context of the Budget.
- India’s first Economic Survey was presented in the year 1950-51.
- This is the first survey by the new chief economic advisor Krishnamurthy V Subramanian.
A sustained real GDP growth rate of 8% is needed for India to become a $5 trillion economy by 2024-25.
Behavioural Economics for Social Change
The survey has drawn on Nobel Laureate Richard Thaler’s Behavioural Economics Theory to lay out an “ambitious agenda” for behavior change that will bring in social change, which in turn, will help India transit to a $5 trillion economy by 2024-25.
Decisions by real people deviate from impractical robots theorized in classical economics. Behavioral economics provides insights to ‘nudge’ people towards desirable behavior.
It pitches for behavioral change by applying the principles of behavioral economics to several issues including gender equality, a healthy and beautiful India, savings, tax compliance, and credit quality.
This includes a transition from ‘BetiBachaoBetiPadhao’ to ‘BADLAV’ (BetiAapkiDhan Lakshmi Aur Vijay Lakshmi), from ‘Swachh Bharat’ to ‘Sundar Bharat’, from ‘Give it up” for the LPG subsidy to ‘Think about the Subsidy’ and from ‘Taxevasion’ to ‘Tax compliance’.
Policies for MSME Growth
Dwarfs are the firms with less than 100 workers despite being more than 10 years old.
They account for more than 50% of all organized firms in manufacturing by number.
Contribution of dwarfs to employment is only 14% and to the productivity is a mere 8%.
Large firms (more than 100 employees) account for 75% employment and close to 90% of productivity despite accounting for about 15% by number.
The survey highlights the importance of intervention in the case of “Dwarfs”.
- A sunset clause of less than 10 years, with necessary grand-fathering, for all size-based incentives.
- Deregulating labor law restrictions to create significantly more jobs.
- Re-calibrating Priority Sector Lending (PSL) guidelines for direct credit flow to young firms in high employment elastic sectors.
- Sunset Clause & Size Based Incentives
- Sunset clause is a provision of a law that it will automatically be terminated after a fixed period unless it is extended by law.
The Economic Survey slammed the practice of perpetual support to small and medium-sized enterprises on the grounds that they are mega job creators. Such a continuous hand-holding merely encourages these entities to keep a check on their scale of operations, i.e. they deliberately stay small.
- The governments should shift their focus to nurturing “infant” firms only.
- Policymakers must ensure that support to small units is withdrawn after a specified time, forcing them to expand their operations and not live off government relief forever.
- The survey also cites “size-based incentives” irrespective of the firm’s age.
Minimum Wage System & Inclusive Growth
Survey proposes a well-designed minimum wage system as a potent tool for protecting workers and alleviating poverty.
The survey supports rationalization of minimum wages as proposed under the Code on Wages Bill. Minimum wages to all employments/workers.
Reforms in the Lower Judiciary
The section on ways to ramp up capacity in the lower judiciary is titled ‘Ending Matsyanyaya’ (the law of the fish/jungle).
Delays in contract enforcement and disposal resolution are now the single biggest hurdle to the ease of doing business and higher GDP growth in India.
However, the survey highlights the profound impact that the Government’s efforts of introducing the Insolvency and Bankruptcy Code and the adoption of the Goods and Services Tax, have had on improving Ease of Doing Business in India.
Data “Of the People, By the People, For the People”
- As data is generated by the people, data can be created as a public good within the legal framework of data privacy.
- The 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.
According to Economic Survey 2019, since mid-2018, what happened to rural wage growth?
a) It started decreasing
b) It started increasing
c) Remains same
d) None of the above
Explanation: Rural wage growth started increasing since mid-2018.