Editorial Articles

Issue no 46, 12-18 February 2022


Economic survey 2021-22 the “agile approach”

The Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman presented the Economic Survey 2021-22 in Parliament on 31st January 2022.


Policy-Making under Conditions of Extreme Uncertainty

For second year running, the Economic Survey was tabled under the cloud of the Covid-19 pandemic. Other than the immediate disruptions and uncertainty caused by repeated waves of the pandemic, the longer-term uncertainty about the post-Covid world due to accelerated shifts in technology, consumer behaviour, supply-chains, geopolitics, climate change and a host of other factors affected the pace of the Indian economy. Not only are these individual factors difficult to forecast, the impact of their interactions are fundamentally unpredictable. The theme of this Economic Survey, therefore, relates to the art and science of policymaking under conditions of extreme uncertainty. This Economic Survey sets out to explain the alternative “Agile Approach” implemented through India's economic response to the Covid-19 shock. This framework is based on feedback loops, real-time monitoring of actual outcomes, flexible responses, safety-net buffers and so on. The last Economic Survey did briefly discuss this approach but this time it is a central theme.


The Indian economy is estimated to grow by 9.2 per cent in real terms in 2021- 22 (as per the First Advance Estimates), after a contraction of 7.3 per cent in 2020- 21. Growth in 2022-23 will be supported by widespread vaccine coverage, gains from supply-side reforms and easing of regulations, robust export growth, and availability of fiscal space to ramp up capital spending. The year ahead is also well poised for a pick-up in private sector investment with the financial system in a good position to provide support to the revival of the economy. Thus, India's GDP is projected to grow in real terms by 8.0- 8.5 per cent in 2022-23. This projection is based on the assumption that there will be no further debilitating pandemic related economic disruption, monsoon will be normal, withdrawal of global liquidity by major central banks will be broadly orderly, oil prices will be in the range of US$70-$75/bbl, and global supply chain disruptions will steadily ease over the course of the year. The projection is comparable with the World Bank's and Asian Development Bank's latest forecasts of real GDP growth of 8.7 per cent and 7.5 per cent respectively for 2022-23. As per the IMF's latest World Economic Outlook (WEO) growth projections released on 25th January, 2022, India's real GDP is projected to grow at 9 per cent in both 2021-22 and 2022-23 and at 7.1 per cent in 2023-24. This projects India as the fastest growing major economy in the world in all these three years.



Agriculture Least Affected by Pandemic: Agriculture and allied sectors have been the least impacted by the pandemic and the sector is expected to grow by 3.9 per cent in 2021-22 after growing 3.6 per cent in the previous year. Importantly, the strong performance of the sector was supported by Government policies that ensured timely supplies of seed and fertilizers despite pandemic related disruptions. It was also helped by good monsoon rains.

·         Agriculture sector accounted for a sizeable 18.8% (2021-22) in Gross Value Added (GVA) z The agriculture sector is expected to clock a growth of 3.9% in 2021-22

·         Minimum Support Price (MSP) policy is being used to promote crop diversification

·         Allied sectors including animal husbandry, dairying and fisheries are steadily emerging to be high growth sectors and major drivers of overall growth in agriculture sector

·         The livestock sector has grown at a CAGR (Compound Annual Growth Rate) of 8.15% over the last five years ending 2019-20

·         Livestock sector has been a stable source of income across groups of agricultural households accounting for about 15% of their average monthly income z Government facilitated food processing through various measures of infrastructure development, subsidized transportation and support for formalization of micro food enterprises

·         Government has further extended the coverage of food security network through schemes like PM Gareeb Kalyan Yojana (PMGKY)


Industrial Sector Shows Signs of Recovery: The industrial sector went through a big swing by first contracting by 7 per cent in 2020-21 and then expanding by 11.8 per cent in this financial year. The manufacturing, construction and mining sub-sectors went through the same swing although the utilities segment experienced a more muted cycle as basic services such as electricity and water supply were maintained even at the height of the national lockdown.

·         Index of Industrial Production (IIP) grew at 17.4 percent (YoY) during April-November 2021 as compared to 15.3 percent in April-November 2020

·         Net profit to sales ratio of large corporates reached an all-time high of 10.6 percent in July-September quarter of 2021-22 despite the pandemic (RBI Study)


Contact-based Services Worst Affected: Services account for more than half of the Indian economy and was the most impacted by the COVID-19 related restrictions, especially for activities that need human contact. Although the overall sector first contracted by 8.4 per cent in 2020-21 and then is estimated to grow by 8.2 per cent in 2021-22, it should be noted that there is a wide dispersion of performance by different sub-sectors. Both the Finance/Real Estate and the Public Administration segments are now well above pre-COVID levels. However, segments like Travel, Trade and Hotels are yet to fully recover. It should be added that the stop-start nature of repeated pandemic waves makes it especially difficult for these sub-sectors to gather momentum. In contrast to contact-based services, distance-enabled services have increased their share with the growing preference for remote interfaces for office work, education and even medical services. Indeed, there has been a boom in software and IT-enabled services exports even as earnings from tourism have declined sharply.

·         During the first half of 2021-22, service sector received over US$ 16.7 billion FDI (Foreign Direct Invest-ment) - accounting for almost 54 percent of total FDI inflows into India

·         IT-BPM (Information Technology - Business Process Management) services revenue reached US$ 194 billion in 2020-21, adding 1.38 lakh employees during the same period

·         Major government reforms include, removing telecom regulations in ITBPM sector and opening up of space sector to private players

·         Services exports surpassed  pandemic level in January-March quarter of 2020-21 and grew by 21.6 percent in the first half of 2021-22 - strengthened by global demand for software and IT services exports

·         India has become 3rd largest start-up ecosystem in the world after US and China. Number of new recogni-zed start-ups increased to over 14000 in 2021-22 from 733 in 2016-17

·         44 Indian start-ups have achieved unicorn status in 2021 taking overall tally of unicorns to 83, most of which are in services sector

·         GVA (Gross Value Added) of services crossed pre-pandemic level in July September quarter of 2021-22; however, GVA of contact intensive sectors like trade, transport, etc. still remain below pre-pandemic level.

·         Overall service sector GVA is expected to grow by 8.2 percent in 2021-22

·         During April-December 2021, rail freight crossed its pre-pandemic level while air freight and port traffic almost reached their pre-pandemic levels, domestic air and rail passenger traffic are increasing gradually - shows impact of second wave was much more muted as compared to during first wave.


Latest advance estimates suggest full recovery of all components on the demand side in 2021-22 except for private consumption. Exports of both goods and services have been exceptionally strong so far in 2021-22, but imports also recovered strongly with recovery in domestic demand as well as higher international commodity prices.

Growth in Consumption: Total consumption is estimated to have grown by 7.0 per cent in 2021-22 with government consumption remaining the biggest contributor as in the previous year. Government consumption is estimated to grow by a strong 7.6 per cent surpassing pre-pandemic levels. Private consumption is also estimated to have improved significantly to recover 97 per cent of corresponding pre-pandemic output level. This is supported by a sharp rebound in HFIs like IIP Consumer Durables. However, the recent dip in vehicle registrations reflects persistent supply-side constraints owing to the shortage of semi-conductor chips rather than lack of consumption demand. Further, RBI's consumer confidence survey results on both the present situation and future expectations suggest sustained uptick in consumer sentiments. Also indicative of uptick in consumer sentiments is the steep rise in digital transactions, notably in UPI payments owing to the pandemic induced shift to contactless payments. Private consumption is poised to see stronger recovery with rapid coverage in vaccination and faster normalisation of economic activities.

Investment Exceeds Pre-Pandemic Levels: Investment, as measured by Gross Fixed Capital Formation (GFCF) is expected to see strong growth of 15 per cent in 2021-22 and achieve full recovery of pre-pandemic level. Government's policy thrust on quickening virtuous cycle of growth via capital expenditure and infrastructure spending has increased capital formation in the economy lifting the Investment : GDP ratio to about 29.6 per cent in 2021-22, the highest in seven years. While private investment recovery is still at a nascent stage, there are many signals which indicate that India is poised for stronger investment. The number of private investment projects under implemen-tation in manufacturing sector has been rising over the years. Companies hitting record profits in recent quarters and mobilization of risk capital bode well for acceleration in private investment. A sturdy and cleaned-up banking sector stands ready to support private investment adequately. Expected increase in private consumption levels will propel capacity utilisation, thereby fuelling private investment activity. RBI's latest Industrial Outlook Survey results indicate rising optimism of investors and expansion in production in the upcoming quarters.

Strong Recovery of Exports/ Imports: India's exports of both goods and services have been exceptionally strong so far in 2021-22. Merchandise exports have been above US$ 30 billion for eight consecutive months in 2021-22, despite a rise in trade costs arising from global supply constraints such as fewer operational shipping vessels, exogenous events such as blockage of Suez Canal and COVID-19 outbreak in port city of China etc. Concurrently, net services exports have also risen sharply, driven by professional and management consulting services, audio visual and related services, freight transport services, telecommuni-cations, computer and information services. From a demand perspective, India's total exports are expected to grow by 16.5 per cent in 2021-22 surpassing pre-pandemic levels. Imports also recovered strongly with revival of domestic demand and continuous rise in price of imported crude and metals. Imports are expected to grow by 29.4 per cent in 2021-22 surpassing corresponding pre-pandemic levels. Resultantly, India's net exports have turned negative in the first half of 2021- 22, compared to a surplus in the corresponding period of 2020-21 with current account recording a modest deficit of 0.2 per cent of GDP in the first half. However, robust capital flows in the form of continued inflow of foreign investment were sufficient to finance the modest current account deficit. Elevated global commodity prices, revival in real economic activity driving higher domestic demand and growing uncertainty surrounding capital inflows may widen current account deficit further during the second half of the year. However, it is expected to be within manageable limits.


Over the last two years, fiscal policy has remained a significant tool for addressing the economic fallout of the pandemic. In the initial phase of the pandemic, the fiscal policy focused on building safety-nets for the poor and vulnerable sections of society to hedge against the worst-case outcomes. Stimulus measures such as direct benefit transfers to the vulnerable sections, emergency credit to the small businesses, and the world's largest food subsidy programme targeting 80.96 crore beneficiaries enabled the creation of safety-nets, by ensuring that the essentials are taken care of. This was followed by a series of stimulus packages spread throughout the year 2020-21. With the restoration of economic activities, the fiscal response focused on stimulating demand in the economy. During this phase of economic recovery, the stimulus mix included investment boosting measures like Production Linked Incentives (PLI), steps to encourage investment in infrastructure sector and enhancing capital expenditure by the Central and state Governments.

The focus on capital spending has been sustained during the current fiscal, with emphasis on railways, roads, urban transport, power, telecom, textiles and affordable housing amid continued focus on the National Infrastructure Pipeline. The National Infrastructure Pipeline covering 6835 projects was expanded to 7400 projects in Budget 2021-22. In order to unlock the domestic manufacturing potential across sectors, such as renewable energy, heavy industry, agriculture, automotive and textiles, Budget 2021-22 launched PLI schemes for 13 sectors, with an outlay of Rs. 1.97 lakh crore, for a period of 5 years starting from 2021-22. All these initiatives are expected to collectively generate employment and boost output in the medium to long term through multipliereffects. The stimulus measures announced during the year 2021-22 have continued the emphasis on liquidity enhancing and investment boosting measures such as the PLI Scheme, credit guarantee schemes and export boosting initiatives to support the reviving economy, apart from providing free food grains to the poor.

Performance of Fiscal Indicators

Sustained revenue collection and a targeted expenditure policy has contained the fiscal deficit at 46.2 percent of Budget Estimate.

·         Gross Tax Revenue registered a growth of over 50 percent z Revenue receipts from the Central have gone up by 67.2 percent as against an expected growth of 9.6 percent in the 2021-22 Budget Estimates (BE)

·         Net tax revenue to the Centre, which was envisaged to grow at 8.5 per cent in 2021-22 BE, grew at 64.9 per cent during April to November 2021.

·         Personal income tax has grown at 47.2 per cent in April-November 2021 z The corporate income tax registered a growth of 90.4 per cent in AprilNovember 2021

·         The indirect tax receipts have registered a growth of 38.6 per cent during April-November 2021

·         Revenue from excise duties registered a growth of 23.2 per cent during April-November 2021

·         The GST collections for the Centre were 61.4 per cent of BE during April to November 2021

·         Gross GST collections, Centre and States taken together, were Rs 10.74 lakh crore during April to December 2021, which is an increase of 61.5 per cent over April to December 2020

·         The non-tax revenue collections up to November 2021 registered an increase of 79.5 per cent Expenditure

·         The total expenditure of the Government increased by 8.8 per cent during April to November 2021 and stood at 59.6 per cent of Budget Estimate.

·         Revenue expenditure has grown by 8.2 per cent during April to November 2021

·         Non-interest revenue expenditure grew by 4.6 per cent during April to November 2021

·         Expenditure on major subsidies stood at Rs 2.31 lakh crore

·         Capital expenditure registered a growth of 13.5 percent during April to November 2021


External Trade Recovers Strongly in 2021-22 : After the pandemic-induced slump of the previous year, external trade recovered with strong capital flows into India, leading to a rapid accumulation of foreign exchange reserves. The resilience of India's external sector during the current year augurs well for growth revival in the economy. However, the downside risks of global liquidity tightening and continued volatility of global commodity prices, high freight costs, coupled with the fresh resurgence of COVID-19 with new variants may pose a challenge for India during 2022-23.

·         India's merchandise exports and imports rebounded strongly and surpassed pre-COVID levels during the current financial year

·         Net capital flows were higher at US$ 65.6 billion in the first half of 2021-22

·         Foreign Exchange Reserves touched US $ 633.6 billion as of December 31, 2021

·         As of end-November 2021, India was the fourth largest forex reserves holder in the world after China, Japan and Switzerland z India's external debt rose to US$593.1 billion at end-September 2021, from US $ 556.8 billion a year earlier, reflecting additional SDR (Special Drawing Rights) allocation by IMF, coupled with higher commercial borrowings

Uncertainty Continues in Global Economy: When the Economic Survey was being compiled, a new COVID wave in the form of the Omicron variant was sweeping across the world, inflation had jumped up in most countries, and the cycle of liquidity withdrawal was being initiated by major central banks. This is why it is especially important to look at India's macro-economic stability indicators and their ability to provide a buffer against the stresses.

Balance of Payments in Surplus: Despite all the disruptions caused by the global pandemic, India's balance of payments remained in surplus throughout the last two years. This allowed the Reserve Bank of India to keep accumulating foreign exchange reserves (they stood at US$ 633.6 billion on 31st December 2021). This is equivalent to 13.2 months of merchan-dise imports and is higher than the country's external debt. The combi-nation of high foreign exchange reserves, sustained foreign direct investment, and rising export earnings will provide an adequate buffer against possible global liquidity tapering in 2022-23.

Fiscal Deficit Increases: The fiscal support given to the economy as well as to the health response caused the fiscal deficit and government debt to rise in 2020-21. However, a strong rebound in government revenues in 2021-22 has meant that the Government will comfortably meet its targets for the year while maintaining the support, and ramping up capital expenditure. The strong revival in revenues (revenue receipts were up over 67 per cent YoY in April-November 2021) means that the Government has fiscal space to provide additional support if necessary.

Capital Markets Fare Well: The financial system is always a possible area of stress during turbulent times. However, India's capital markets, like many global markets, have done exceptionally well and have allowed record mobilization of risk capital for Indian companies. More significantly, the banking system is well capitalized and the overhang of Non-Performing Assets seems to have structurally declined even allowing for some lagged impact of the pandemic.

·         2021-22 has been an exceptional year for the Capital Markets

·         Rs. 89,066 crore was raised via 75 Initial Public Offering (IPO) issues in AprilNovember 2021, much higher than in any year in the last decade

·         Sensex and Nifty scaled up to touch peak at 61,766 and 18,477 on October 18, 2021

·         Among major emerging market economies, Indian markets outperformed peers in April-December 2021

Vaccination Becomes an Economic Indicator: Vaccination is not merely a health response but is critical for opening up the economy, particularly contact-intensive services. Therefore, it should be treated for now as a macroeconomic indicator. Over the course of a year, India delivered 157 crore doses that covered 91 crore people with at least one dose and 66 crore with both doses.

Imported Inflation not a Threat: Inflation has reappeared as a global issue in both advanced and emerging economies. India's Consumer Price Index inflation stood at 5.6 per cent YoY in December 2021 which is within the targeted tolerance band. Wholesale price inflation, however, has been running in double-digits. Although this is partly due to base effects that will even out, India does need to be wary of imported inflation, especially from elevated global energy prices.


Monetary policy and liquidity operations since the beginning of the COVID-19 pandemic have geared towards mitigating its adverse impact on economy. Accommodative monetary policy along with other regulatory dispensations, asset classification standstill, temporary moratorium and provision of adequate liquidity were put in place in order to provide a safety net to the system. In 2021-22, some of the measures undertaken by RBI like CRR reduction reached pre-set sunset dates, liquidity has been wound down partly but remains in surplus mode and regulatory measures have been realigned.

·         The liquidity in the system remained in surplus in 2021- 22 z Repo rate was maintained at 4 per cent

·         RBI undertook various measures such as G-Sec Acquisition Programme and Special Long-Term Repo Operations to provide further liquidity

·         YoY Bank credit growth accelerated gradually in 2021-22 from 5.3 per cent in April 2021 to 9.2 per cent as on 31st December 2021

·         The Gross Non-Performing Advances ratio of Scheduled Commercial Banks (SCBs) declined from 11.2 per cent at the end of 2017-18 to 6.9 per cent at the end of September, 2021

·         Net Non-Performing Advances ratio declined from 6 percent to 2.2 per cent during the same period

·         Capital to risk-weighted asset ratio of SCBs continued to increase from 13 per cent in 2013-14 to 16.54 per cent at the end of September 2021

·         The Return on Assets and Return on Equity for Public Sector Banks continued to be positive for the period ending September 2021 Prices and Inflation (April - December)

·         Consumer Price Index (Combined) based inflation moderated to 5.2 per from 6.6 per cent in the corresponding period

·         Food inflation averaged at a low of 2.9 per cent as against 9.1 per cent in the corresponding period of 2020-21 z Easing of food inflation led to a decline in retail inflation

·         Effective supply-side management kept prices of most essential commodities under control

·         Proactive measures were taken to contain the price rise in pulses and edible oils

·         Reduction in central excise and subsequent cuts in Value Added Tax by most States helped ease petrol and diesel prices

·         Wholesale Price Index (WPI)-based inflation rose to 12.5 per cent. This has been attributed to various factors including low base in the previous year, pick-up in economic activity, sharp increase in international prices of crude oil and other imported inputs, and high freight costs


·         India's overall score on the NITI Aayog SDG India Index and Dashboard improved to 66 in 2020-21 from 60 in 2019-20 and 57 in 2018-19

·         Number of Front Runners (scoring 65-99) increased to 22 States and UTs in 2020- 21 from 10 in 2019-20 z In North East India, 64 districts were Front Runners and 39 districts were Performers in the NITI Aayog North-Eastern Region District SDG Index 2021-22

·         India has the tenth largest forest area in the world

·         In August 2021, the Plastic Waste Management Amendment Rules, 2021, was notified which is aimed at phasing out single use plastic by 2022

·         Draft regulation on Extended Producer Responsibility for plastic packaging was notified

·         The Compliance status of Grossly Polluting Industries (GPIs) located in the Ganga main stem and its tributaries improved from 39% in 2017 to 81% in 2020

·         The consequent reduction in effluent discharge has decreased from 349.13 millions of litres per day (MLD) in 2017 to 280.20 MLD in 2020

·         The Prime Minister, as a part of the national statement delivered at the 26th Conference of Parties (COP 26) in Glasgow in November 2021, announced ambitious targets to be achieved by 2030 to enable further reduction in emissions

·         The need to start the oneword movement 'LIFE' (Lifestyle for Environment) urging mindful and deliberate utilization instead of mindless and destructive consumption was underlined


As per the quarterly Periodic Labour Force Survey (PLFS) data up to March 2021, employment in urban sector affected by pandemic has recovered almost to the prepandemic level.

·         The number of unemployed persons in 2019-20 has decreased by 23 lakhs, constituted largely by males from the rural sector.

·         Between 2018-19 and 2019- 20, about 4.75 crore additional persons joined the workforce. This is about three times more than the employment created between 2017-18 and 2018- 19.

·         The rural sector contributed much more to this expansion relative to the urban sector (3.45 crore in rural sector and 1.30 crore in urban sector).

·         Amongst the additional workers, 2.99 crore were females (63 percent)

·         About 65 percent of the additional workers joined in 2019-20 were self-employed.

·         About 75 percent of the female workers who joined as self-employed were 'unpaid family labour.'

·         About 18 percent of the additional workers were Casual Labourer and 17 percent were 'Regular Wage/ Salaried Employee'.

·         Trade, hotel and restaurant sector accounted for a little over 22 percent of the new workers

·         The share of manufacturing has declined from 5.65 percent of new workers added in 2018-19 to about 2.41 percent of new workers added in 2019-20

·         The share of construction has also declined from 26.26 percent to 7.36 percent

Skill Development: As per the report of first quarter (AprilJune, 2021) of Quarterly Employment Survey (QES) in respect of establishments employing at least 10 workers in major nine sectors, 17.9 percent of estimated establish-ments were imparting formal skill training. Sectors such as IT/BPO imparted skill training in 29.8 percent of estimated establishments, followed by 22.6 percent financial services and 21.1 percent education sector's establish-ments. Further, about 24.3 percent estimated establishments were found to be imparting 'On-the-Job' training, which is higher in IT/ BPO sector (36.1 percent of establishments) and financial services sector (34.8 percent). Meanwhile, government initiatives like the focus on vocational training in the National Education Policy, Skill India Mission, Aatmanirbhar Skilled Emplo-yees Employer Mapping (ASEEM) portal, India International Skill Centre (IISC) Network, Pradhan Mantri Dakshta Aur Kushalta Sampann Hitgrahi Yojana (PM-DAKSH) conti-nued to facilitate the reskilling and up-skilling of the labour force to make them industry-ready.

(Compiled by EN Team) Source: Economic Survey 2021-22/PIB