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Eco Survey calls for reverse flipping’ of Indian startups

The Economic Survey noted that the flipping phenomenon “reflects startups venturing out for short-term gains in the dynamic, uncertain geopolitical world”…reports Asian Lite News

As external support from the government has made it relatively easier than before for entrepreneurship to thrive, there are several inherent challenges faced by startups, like ever-elusive funding, revenue generation struggles, lack of easy access to supportive infrastructure, or wading through the regulatory environment and tax structures, the Economic Survey for 2022-23 said on Tuesday.

As per the Survey, tabled in Parliament by Finance Minister Nirmala Sitharaman, it has also been observed that many Indian companies have been getting headquartered overseas, especially in destinations with favourable legal environments and taxation policies.

“The technical jargon for this may be identified as ‘Flipping’, which is the process of transferring the entire ownership of an Indian company to an overseas entity, accompanied by a transfer of all IP and all data hitherto owned by the Indian company,” the document read.

The Economic Survey noted that the flipping phenomenon “reflects startups venturing out for short-term gains in the dynamic, uncertain geopolitical world”.

“However, the flip can be reversed with the collective action by the government related regulatory bodies and other stakeholders. With solution-oriented strategies, startups will continue to be the messengers of India’s entrepreneurial dynamism,” it added.

To accelerate the process of “reverse dipping”, certain measures are possible like simplifying the process for grant of “Inter-Ministerial Board (IMB) certification” for startups, further simplification of taxation of Employee Stock Options (ESOPs), simplifying multiple layers of tax and uncertainty due to tax litigation and the procedures for capital flows.

The government and other stakeholders should also facilitate improved collaboration and partnerships with established private entities to develop best practices and state-of-the-art startup mentorship platforms, said the Survey.

In the current scenario, the Economic Survey for 2022-23 said that more than 9 lakh direct jobs have been created by the Department for Promotion of Industry and Internal Trade (DPIIT)-recognised startups, with a notable 64 per cent increase in 2022.

As per the Survey, the number of recognised startups in the country has increased from 452 in 2016 to 84,012 in 2022.

“About 48 per cent of our startups are from Tier II and III cities, a testimony of our grassroots’ tremendous potential,” read the Eco survey.

“India ranks among the largest startup ecosystems in the world. various targeted initiatives of the government have given a major boost to start-ups,” the document said.

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Economic Survey reveals India’s economic resilience

Despite the downward revision, the growth estimate for FY23 is higher than for almost all major economies..reports Asian Lite News

Despite strong global headwinds and tighter domestic monetary policy, if India is still expected to grow between 6.5 and 7.0 per cent, and that too without the advantage of a base effect, it is a reflection of India’s underlying economic resilience; of its ability to recoup, renew and re-energise the growth drivers of the economy, Economic Survey 2022-23 has noted.

Monetary tightening by the RBI, the widening of the Current Account Deficit (CAD), and the plateauing growth of exports have essentially been the outcome of geopolitical strife in Europe.

As these developments posed downside risks to the growth of the Indian economy in FY23, many agencies worldwide have been revising their growth forecast of the Indian economy downwards.

These forecasts, including the advance estimates released by the National Statistical Office (NSO), now broadly lie in the range of 6.5-7.0 per cent. Despite the downward revision, the growth estimate for FY23 is higher than for almost all major economies and even slightly above the average growth of the Indian economy in the decade leading up to the pandemic, the Survey said.

IMF estimates India to be one of the top two fast-growing significant economies in 2022. India’s economic resilience can be seen in the domestic stimulus to growth seamlessly replacing the external stimuli.

The growth of exports may have moderated in the second half of FY23. However, their surge in FY22 and the first half of FY23 induced a shift in the gears of the production processes from mild acceleration to cruise mode.

Manufacturing and investment activities consequently gained traction. By the time the growth of exports moderated, the rebound in domestic consumption had sufficiently matured to take forward the growth of India’s economy.

Private Consumption as a percentage of GDP stood at 58.4 per cent in Q2 of FY23, the highest among the second quarters of all the years since 2013-14, supported by a rebound in contact-intensive services such as trade, hotel and transport, which registered sequential growth of 16 per cent in real terms in Q2 of FY23 compared to the previous quarter.

Although domestic consumption rebounded in many economies, the rebound in India was impressive for its scale, the Survey said.

It contributed to a rise in domestic capacity utilisation. Domestic private consumption remains buoyant in November 2022, as indicated by Motilal Oswal’s Economic Activity Index. The index estimates that private consumption grew at a five-month high pace of 5.6 per cent YoY, driven by auto sales and broad-based expansion of services.

ALSO READ: Economic Survey: India’s growth inclusive with focus on job creation

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Economic Survey: India’s growth inclusive with focus on job creation

Citing a UNDP report of July 2022, the survey stated that the recent inflationary episode in India would have a low poverty impact due to well-targeted support…reports Asian Lite News

The Economic Survey for 2022-23, which was laid in Parliament by Finance Minister Nirmala Sitharaman on Tuesday, has underlined that India’s growth has been inclusive as it has focussed on job creation.

India is the third-largest economy in the world in public-private partnership (PPP) terms and the fifth-largest in market exchange rates. “As expected of a nation of this size, the Indian economy in FY23 has nearly recouped what was lost, renewed what had paused, and re-energised what had slowed during the pandemic and since the conflict in Europe,” the survey noted.

“Both official and unofficial sources confirm that employment levels have risen in the current financial year, as the Periodic Labour Force Survey (PLFS) shows that the urban unemployment rate for people aged 15 years and above declined from 9.8 per cent in the quarter ending September 2021 to 7.2 per cent a year later (quarter ending September 2022). This is accompanied by an improvement in the labour force participation rate (LFPR) as well, confirming the emergence of the economy out of the pandemic-induced slowdown early in 2022-23,” the survey noted in its chapter on India’s inclusive growth.

In 2020-21, the Government had announced the emergency credit line guarantee scheme (ECLGS), which succeeded in shielding micro, small and medium enterprises from financial distress, the document said.

Citing a recent CIBIL report, the economic survey said that ECLGS has supported MSMEs in facing the Covid shock, with 83 per cent of the borrowers that availed of the ECLGS being micro-enterprises. Among these micro units, more than half had an overall exposure of less than Rs 10 lakh.

Furthermore, the CIBIL data also shows that ECLGS borrowers had lower non-performing asset rates than enterprises that were eligible for ECLGS but did not avail of it. Further, the GST paid by MSMEs after declining in 2020-21 has been rising since and now has crossed the pre-pandemic level of FY20, reflecting the financial resilience of small businesses and the effectiveness of the pre-emptive government intervention targeted towards MSMEs, the survey noted.

Moreover, MGNREGA has been rapidly creating more assets in respect of “Works on individual’s land” than in any other category. In addition, schemes like PM-KISAN, which benefits households covering half the rural population, and PM Garib Kalyan Anna Yojana have significantly contributed to lessening impoverishment in the country, it outlined.

Citing a UNDP report of July 2022, the survey stated that the recent inflationary episode in India would have a low poverty impact due to well-targeted support. In addition, the National Family Health Survey (NFHS) in India shows improved rural welfare indicators from 2015-16 to 2019-20, covering aspects like gender, fertility rate, household amenities, and women empowerment.

“So far, India has reinforced the country’s belief in its economic resilience as it has withstood the challenge of mitigating external imbalances caused by the Russia-Ukraine conflict without losing growth momentum in the process. India’s stock markets had a positive return in CY22, unfazed by withdrawals by foreign portfolio investors. India’s inflation rate did not creep too far above its tolerance range compared to several advanced nations and regions,” the survey said.

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Economic Survey showcases country’s development via satellite imagery

The images show that Kharif sowing cycle has shifted ahead by around two-to-three weeks causing the Kharif harvest to almost coincide with Rabi sowing in November…reports Asian Lite News

An important theme of this year’s Economic Survey is the use of new forms of data and information for tracking economic activity and development.

The Survey looks at the use of a new kind of data – geo-spatial data and cartographic techniques – to track, compare and represent longer term developments.

Geospatial maps not only lets users visualise the data, but also helps users to better understand trends, relationships and patterns. The use of maps is not entirely new and previous Economic Surveys have used them for years, but there is now a plethora of information from satellites, drones, mobile phones and other sources.

Using satellite images, India’s night-time luminosity is compared between 2012 and 2021. Night-time luminosity provides an interesting representation of the expansion of electricity supply, the geographical distribution of population and economic activity, urban expansion as well as growth of ribbon developments between urban hubs.

Similarly, using geospatial and cartographic techniques, the subsequent maps show the extent of physical as well as financial infrastructure development in India.

This includes expansion of national highways, airports, commercial bank branches, metros, etc. The maps depict change in net sown area of India over the last 15 years. The maps have been created by combining satellite data over the course of a 12-month period in each year.

The images compare the Kharif crop cycle in Moga district, Punjab, during 2005 and 2021. The images show that Kharif sowing cycle has shifted ahead by around two-to-three weeks causing the Kharif harvest to almost coincide with Rabi sowing in November.

The closing of the gap is a likely factor that encourages farmers to burn stubble and may be related to restrictions on early transplanting of Kharif paddy. These restrictions were introduced in 2009 in order to reduce pumping of ground-water, but may have had the unintended consequence of damaging air quality.

Satellite imagery is used to show annual water storage cycle at Stanley Reservoir, Tamil Nadu.

Using new geo-spatial methods, population density of select Indian cities is compared over time, showing the extent of urban expansion in Delhi-NCR and Bengaluru between 2001 and 2021. Using satellite imagery, illustrations are given for wasteland redeployment in Andhra Pradesh and Gujarat.

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Service sector rebounds amid pandemic threats: Economy Survey

During the first half of 2021-22, the services sector received over $16.7 billion FDI accounting for almost 54 per cent of the total FDI inflows into the country…reports Asian Lite News

The services sector’s sub-sector, which is contact-intensive in nature, is still below the pre-pandemic level, the Economy Survey 2021-22 said.

Those sub-sectors are trade, hotels, transport, communication and services related to broadcasting, it said.

“The services sector, as a whole, has mostly recovered from the impact of the nationwide lockdown imposed during March-May 2020 and localised lockdowns during the second Covid wave in April-May 2021, although some of the sub-sectors continue to be impacted.”

During the first half of FY22, the services sector grew by 10.8 per cent.

During the first half of 2021-22, the services sector received over $16.7 billion FDI accounting for almost 54 per cent of the total FDI inflows into the country.

The overall services sector, in terms of Gross Value Added, is expected to grow by 8.2 per cent in FY22, although the spread of Omicron variant brings in a degree of uncertainty for the near term, especially in segments that require human contact.

Further, domestic air and rail passenger traffic also increased gradually, while the global issue of container shortage impacted port traffic.

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Economic Survey pegs growth at 8 to 8.5% for new financial year

According to the Survey, the supply-side reforms undertaken by the government in the last two years include deregulation of numerous sectors, simplification of processes, removal of legacy issues like ‘retrospective tax’, privatisation, production-linked incentives and so on, reports Asian Lite News

With the number of Covid-19 infections coming down, the Economic Survey has projected the Indian economy to grow between 8.0-8.5 per cent in 2022-23 as it expects the economic momentum to come back while reaping the benefits of the supply-side reforms announced by the government in the last two years.              

“This projection is also 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,” said the Economic Survey.

According to the Survey, the supply-side reforms undertaken by the government in the last two years include deregulation of numerous sectors, simplification of processes, removal of legacy issues like ‘retrospective tax’, privatisation, production-linked incentives and so on.

While the projected GDP growth for 2022-23 will make India the fastest growing economy in the world even next year, it is still below the International Monetary Fund’s projections for India’s growth at 9 per cent for 2022-23.

The annual Economic Survey gives projections for the forthcoming year and gives a review of the year gone by. The survey was tabled in Parliament today ahead of the presentation of the Union Budget for 2021-22 on Tuesday.

The GDP growth in the current financial year (2021-22) is expected at 9.2 per cent, according to the National Statistics Office, while the Reserve Bank of India has forecast it to grow at 9.5 per cent.

At 9.2 per cent, India’s GDP growth in 2021-22 will be the fastest in at least 17 years. It had contracted by a record 7.3 per cent in 2020-21.

“Overall, macroeconomic stability indicators suggest that the Indian economy is well-placed to take on the challenges of 2022-23,” said the Survey.

Growth in government revenues will help in meeting fiscal targets

The Economic survey has said that with the strong rebound in tax revenues in 2021-22, the government will be able to provide additional fiscal support if necessary. 

“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 Survey said.

The Centre’s fiscal deficit declined 35.3 per cent as against last year to Rs 6.9 lakh crore in April-November period, accounting for 46.2 per cent of the Budget target for the full year, data released by the Controller General of Accounts showed.

Fiscal deficit in the same period last year had accounted for 135.1 per cent of the full year’s target as the pandemic-induced lockdowns had fractured the government’s finances. The government’s financial position is substantially better in the current financial year, primarily on account of the sharp increase in receipts.

The fiscal deficit target for 2021-22 is Rs 15 lakh crore, or 6.8 per cent of the GDP.

The sharply higher-than-projected nominal GDP at 17.6 per cent in 2021-22 will also help the government to project a lower fiscal deficit as a ratio of GDP.

According to a back-of-the-envelope calculation, the fiscal deficit in 2021-22 will fall 6.5 per cent of GDP from the budgeted 6.8 per cent because of the higher nominal GDP projected by the statistics office.                 

Need to be wary of global energy prices

According to the Economic Survey, inflation has reappeared as a global issue in both advanced and emerging economies and India needs to be wary of imported inflation especially from global energy prices.

India’s headline inflation rate based on the Consumer Price Index (CPI) surged to a five-month high of 5.6 per cent in December, primarily on account of the statistical effect of a low base. Retail inflation was 4.91 per cent a month ago.

With this, CPI inflation has averaged 5 per cent for the October-December period, marginally below the RBI’s forecast of 5.1 per cent.

Wholesale price inflation, however, has been running in double-digits.

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