Economic Survey for 2021-22 Makes Case for India’s Macroeconomic Stability Despite COVID-19

Posted by Written by Melissa Cyrill Reading Time: 7 minutes

According to the Economic Survey, the Indian economy is projected to grow 8-8.5% in 2022-23 on the back of increased capital expenditure and export growth. However, this is already lower than the 9.2-9.5% estimate range for the current fiscal, and based on positive assumptions like limited pandemic disruptions, crude oil at US$70-75 prices, stable liquidity movement managed by global central banks, and easing of worldwide supply chain blockages. In other words, the 2021-22 Economic Survey’s projections remain aspirational and essentially reflect the Indian government’s intentions and recent economic performance, which will be supported by contents of the Union Budget 2022-23 – to be announced February 1.

Tabled in Parliament today – ahead of the Union Budget for 2022-23 tomorrow, February 1 – the 2021-22 Economic Survey of India offers a glimpse into the state of the country’s economy, suggests policy solutions, and forecasts GDP goalposts for the coming fiscal.


This year, the Economic Survey was tabled by Finance Minister Nirmala Sitharaman in the Lok Sabha. The Survey is authored by a team led by the country’s Chief Economic Advisor (CEA). Just days before today’s Economic Survey presentation, the Indian government appointed V. Anantha Nageswaran as the new CEA. Nageswaran is an economist and former executive with Credit Suisse Group AG and Julius Baer Group. He succeeds K.V. Subramaniam who completed his three-year term in December 2021.

The last Survey, presented in January 2021, had projected India’s 2021-22 economic growth at 11 percent. However, with the COVID-19 pandemic still going strong, economic activity continues to be disrupted due to lockdowns and restrictions on public movement across multiple regions amid intermittent outbreaks linked to new COVID variants.

Released in January this year, advance estimates by the National Statistical Office (NSO) projected that India will achieve 9.2 percent real GDP expansion this fiscal, after contracting in 2020-21, but lower than the 9.5 percent put forth by the Reserve Bank of India. The 2021-22 Economic Survey, however, pulls down this projection to 8-8.5 percent for the next fiscal year, which starts April 1.

What is the Barbell Strategy and how did India use this approach to manage economic growth during the ongoing fiscal year?

The Economic Survey noted that the government used the Barbell Strategy to manage growth during the pandemic and cushion some of its worst effects on the economy. The Survey explained that this strategy combined safety nets for vulnerable segments of the population and policy adjustments based on real-time information.

Conventionally, India has adopted the more methodical Waterfall approach that involves a first detailed assessment followed by a rigid plan.

On the other hand, the Barbell Strategy is more agile, and more prevalent in technology industries and in project management. It accounts for worse possibilities and recalibrates its responses based on a real-time feedback loop. This has become increasingly possible due to the comparatively easier availability of mass data sets through digital platforms like GST collection, power consumption, cargo movement, highway toll collection, satellite images and geo-spatial data, digital payments, volume of cash transactions, mobility tracking data, etc.

Key takeaways from the 2021-22 Economic Survey of India

  • GDP growth rate for FY 2022-23 (FY23) – estimated at 8-8.5 percent.
  • Revenue and deficit management – government revenues buoyed by strong collections of direct and indirect tax. Gross monthly GST collection crossed INR 1 trillion every month since July 2021. Revenue from excise duties hit 23.2 percent year-on-year growth in April-November 2021.
    India’s fiscal deficit for April-November 2021 contained at 46.2 percent of 2021-22 Budget Estimates (BE) – this is about one-third of the proportion recorded during the same period in previous years, that is 135.1 percent of BE in April-November 2020 and 114.8 percent of BE in April-November 2019. Government thus has fiscal space to provide additional support where necessary.
  • Banking – India’s banks are well capitalized and non-performing assets (NPAs) appear to have structurally declined.
  • Trade – total exports from India to grow 16.5 percent in FY 2021-22 (FY22), higher than before the pandemic. Imports also expected to grow, by 29.4 percent in 2021-22, due to recovery in domestic demand and higher international commodity prices.
    The Economic Survey said that FTAs would be necessary to diversify export baskets and destinations. Currently more than 40 percent of India’s exports go to just seven countries.
  • Labor reforms – The Survey notes: “As on January 11, 2022, 26 states/UTs have also pre-published the draft rules under the Code on Wages, 22 states/UTs under Industrial Relations Code, 20 states/UTs under Code on Social Security, and 17 states/UTs under OSH & WC Code.” India’s parliament amalgamated 29 central labor laws into four labor codes in 2019 and 2020, namely, the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health & Working Conditions Code, 2020.
  • MSMEs More than 6.6 million micro, small, and medium enterprises (MSMEs) have registered on the Udyam portal and the initiative – in effect from July 1, 2020 – has improved the ease of doing business for MSMEs. Udyam Registration is based on specified investment and turnover criteria that classifies new and existing MSMEs. The Hindu Business Line reports: “As of January 17, 2022, about 66,34,006 enterprises have registered on the Udyam portal, out of which 62,79,858 were micro, 3,19,793 small and 34,355 medium enterprises.” Retail and wholesale trades are allowed to register on the portal but benefits to retail and wholesale trade MSMEs are restricted to priority sector lending only. Interestingly, street vendors can register on the Udyam portal as retail traders and avail priority sector lending benefits.
  • Agriculture sector – least affected by the pandemic and expected to grow by 3.9 percent in FY22; previous fiscal this was 3.6 percent.
  • Industrial sector – grew 22.9 percent in the first half of 2021-22 as compared to the same period in 2020-21. Advance estimates suggest GVA in the industrial sector will grow by 11.8 percent in 2021-22 after contracting 7 percent in 2020-21.
    The Index for Industrial Production (IIP) grew at 17.4 percent in April-November 2021-22, compared to (-)15.3 percent in April-November 2020-21.
    The Survey notes: “According to RBI-Studies on Corporate Performance, which is based on the results of select listed companies in the private corporate sector, the net profit to sales ratio of large corporates reached an all-time high despite the pandemic. Buoyant FDI inflows amid improvements in overall business sentiments foretells a positive outlook for the industry.
  • Emphasis on supply-side reforms – this includes deregulation of several sectors, simplification of bureaucratic procedures, removal of retrospective tax, expanding production-linked incentives, privatization, etc.
  • Services sector – expected to grow by 8.2 percent in 2021-22 following 8.4 percent contraction the previous year. The sector involves the most human contact and has been the hardest hit by the pandemic.
  • Capital markets – India has outperformed among its emerging market peers in April-December 2021. Primary markets saw a boom in fundraising through initial public offerings (IPOs) by many new age companies, tech start-ups, and unicorns. In April-November 2021, INR 890.66 billion was raised via 75 IPO issues versus 29 companies raising INR 147.33 billion in the same period in 2020.
  • Start-ups – India has the third largest start-up ecosystem in the world, after US and China. Delhi registered 5,000 new start-ups, followed by 4,514 in Bengaluru – between April 2019 and December 2021. India also recorded 44 unicorns in 2021, setting a record for the country. The state of Maharashtra has the highest number of recognized start-ups at 11,308. India officially recognized 14,000 new start-ups in 2021; to contrast, in 2016-17 this number was 733. Cumulatively, the Indian government has recognized 61,400 start-ups as on January 10, 2022.
  • Innovation and patents – India ranked 46th in 2021, up from 81st in 2015-16, on the Global Innovation Index. Patents granted in India in 2020-21 amounted to 28,391 – up from 7,509 in 2010-11. Indian residents accounted for 40 percent of total patent applications in 2020-21.
  • Going cashless – Unified Payments Interface is the single largest retail payment system in India based on volume of transactions. UPI recorded 4.6 billion transactions worth INR 8.26 trillion – just in the month of December 2021. In the period April-November 2021, UPI processed more that 24.26 One Time Mandate (OTM) create transactions worth INR 443.81 billion. (OTM enables the bank account holder to deduct a certain amount from their savings account at regular intervals so that it gets credited into their Systematic Investment Plan (SIP) portfolio.
  • Social service expenditure to rise 9.8 percent in FY22.
  • Inflation across the world to impact India. According to the Survey: “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.”
  • Consumption growth – government spending pulled up consumption, which has grown 7 percent in 2021-22.
  • Reluctance for loans / borrowings / EMIs – However, household finances remain a stress factor due to pandemic-related uncertainties affecting jobs and incomes. Home loans down 0.4 percent from 2020 to register 8 percent growth in November 2021. Middle class borrowing to own houses is much lower than the 21 percent growth year-on-year (y-o-y) recorded in March 2019. It is also lower than the level of the past four years. Home loans grew 13.3 percent y-o-y in March 2018, 21.1 percent in 2019, 13.3 percent in March 2020, and 9.1 percent in March 2021.
  • Capex and infrastructure – Indian Railways recorded capital expenditure worth INR 651.57 billion from April to November 2021; outlay for FY22 is INR 2.51 trillion. According to the Survey: “In addition, the extent of road construction per day increased substantially in 2020-21 to 36.5 kms per day from 28 kms per day in 2019-20, a rise by 30.4 percent as compared to the previous year.” “[The] government’s policy thrust on quickening virtuous cycle of growth via Capex and infrastructure spending gas increased capital formation in the economy lifting the investment to GDP ratio to about 29.6 percent in 2021-22 – the highest in seven years.”
    The Economic Survey notes that India has to spend about US$1.4 trillion between now and FY 2024-25 to achieve a US$1.5 trillion GDP by FY25. Several initiatives to propel infrastructure investments include the National Infrastructure Pipeline (NIP) and the National Monetization Plan (NMP). NIP projected infra investment during 2020-2025 is US$1.5 trillion “to provide world-class infrastructure across the country, and improve the quality of life” for [all] citizens. The Economic Times notes “five sectors capture around 83% of the aggregate pipeline value: roads (27%), railways (25%), power (15%), oil & gas pipelines (8%) and telecom (6%)”.
  • National Land Monetisation Corp (NLMC) – special purpose vehicle for management and monetization of non-core assets incorporated as a 100 percent government of India owned entity. Central public sector enterprises have referred 3,400 acres of land and other non-core assets, including MTNL, BSNL, BPCL, B&R, BEML, HMT Ltd, Instrumentation Ltd.
  • Real estate – housing sales could witness boost from lowered duties in multiple states.
  • Deficit and debt indicators see uptick resulting in projected government finances consolidation in 2021-22.

The Economic Survey of India for 2021-2022 and its Statistical Appendix is officially available here in PDF format:

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