Summary: Economic Survey (Volume 1 & 2) 2019-20 | RBI Grade B Phase 1 Preparation - Bank Exams PDF Download

 Page 1


 
 
1 
                   
ECONOMIC SURVEY SUMMARY 2020 - VOLUME I & II 
Table of Contents 
VOLUME - I _____________________________________________________________________ 2 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST ___ 2 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS ____________ 4 
CHAPTER 3: PRO-BUSINESS VS PRO-CRONY ___________________________________________ 6 
CHAPTER 4: UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE 
THAN IT HELPS __________________________________________________________________ 9 
CHAPTER 5: CREATING JOBS AND GROWTH BY SPECIALIZING TO EXPORTS IN NETWORK 
PRODUCTS ____________________________________________________________________ 13 
CHAPTER 6: TARGETING EASE OF DOING BUSINESS IN INDIA ____________________________ 16 
CHAPTER 7: GOLDEN JUBLEE OF BANK NATIONALIZATION: TAKING STOCK ________________ 19 
CHAPTER 8: FINANCIAL FRAGILITY IN THE NBFC SECTOR _______________________________ 22 
CHAPTER 9: PRIVATIZATION AND WEALTH CREATION _________________________________ 24 
CHAPTER 10: IS INDIA’S GDP GROWTH OVERSTATED? NO! _____________________________ 26 
CHAPTER 11: THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA ______________ 27 
VOLUME - II ___________________________________________________________________ 28 
CHAPTER 1: STATE OF THE ECONOMY ______________________________________________ 28 
CHAPTER 2: FISCAL DEVELOPMENTS _______________________________________________ 31 
CHAPTER 3: EXTERNAL SECTOR ____________________________________________________ 35 
CHAPTER 4: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 
CHAPTER 5: PRICES AND INFLATION ________________________________________________ 44 
CHAPTER 6: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 47 
CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 52 
CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 57 
CHAPTER 9: SERVICES SECTOR ____________________________________________________ 62 
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 65 
 
 
  
 
 
 
 
Page 2


 
 
1 
                   
ECONOMIC SURVEY SUMMARY 2020 - VOLUME I & II 
Table of Contents 
VOLUME - I _____________________________________________________________________ 2 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST ___ 2 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS ____________ 4 
CHAPTER 3: PRO-BUSINESS VS PRO-CRONY ___________________________________________ 6 
CHAPTER 4: UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE 
THAN IT HELPS __________________________________________________________________ 9 
CHAPTER 5: CREATING JOBS AND GROWTH BY SPECIALIZING TO EXPORTS IN NETWORK 
PRODUCTS ____________________________________________________________________ 13 
CHAPTER 6: TARGETING EASE OF DOING BUSINESS IN INDIA ____________________________ 16 
CHAPTER 7: GOLDEN JUBLEE OF BANK NATIONALIZATION: TAKING STOCK ________________ 19 
CHAPTER 8: FINANCIAL FRAGILITY IN THE NBFC SECTOR _______________________________ 22 
CHAPTER 9: PRIVATIZATION AND WEALTH CREATION _________________________________ 24 
CHAPTER 10: IS INDIA’S GDP GROWTH OVERSTATED? NO! _____________________________ 26 
CHAPTER 11: THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA ______________ 27 
VOLUME - II ___________________________________________________________________ 28 
CHAPTER 1: STATE OF THE ECONOMY ______________________________________________ 28 
CHAPTER 2: FISCAL DEVELOPMENTS _______________________________________________ 31 
CHAPTER 3: EXTERNAL SECTOR ____________________________________________________ 35 
CHAPTER 4: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 
CHAPTER 5: PRICES AND INFLATION ________________________________________________ 44 
CHAPTER 6: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 47 
CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 52 
CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 57 
CHAPTER 9: SERVICES SECTOR ____________________________________________________ 62 
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 65 
 
 
  
 
 
 
 
 
 
2 
                    
VOLUME - I 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE 
HAND SUPPORTED BY THE HAND OF TRUST  
Theme  
This chapter uses ideas from ancient literatures such as Arthashastra that supports the importance of 
ethical wealth creation for the growth and economic development of India. In doing so, the chapter 
highlighted the role played by the market in creating that ethical wealth and how the government can 
enable an environment of trust for those markets to thrive. 
Importance of Wealth creation 
• Survey notes that our age-old traditions have always 
commended wealth creation that made India a 
significant contributor to world’s GDP for more than 
three-fourths of known economic history. 
• The contemporary evidence to this ancient thinking is 
reflected by the exponential rise in India’s GDP and 
GDP per capita post economic liberalisation in 1991 
and corresponding wealth generation in the stock 
market.  
• The survey after collating data from top 100 wealthy entrepreneurs in the country as estimated by 
Forbes, showed how wealth created by an ethical company correlates strongly with the benefits that 
accrue to the employees of the company, suppliers of raw material to the company, government and to 
the common citizens of the country. 
Wealth Creation through the invisible hand of markets  
• The market economy is based on the principle that optimal allocation of resources occurs when 
citizens are able to exercise free choice in the products or services they want.  
• The survey highlighted that there still exists a scepticism about the benefits accruing from enabling 
the invisible hand of market i.e. increasing economic openness of our country and that scepticism has 
to go for India to grow. 
• To support this argument, survey has taken examples from different sectors such as banking, mutual 
funds, ports, etc. to show that since 1991, sectors that were liberalized grew significantly faster than 
those that remain closed.  
The breakdown of trust in the early years of this millennium  
• In a market economy too, there is need for state to ensure a moral hand to support the invisible hand 
as markets are liable to debase ethics 
in the pursuit of profits at all cost.  
• As in the case of the Global Financial 
Crisis, the events of 2011-13 and the 
consequences that have followed have 
created a trust deficit in the economy 
which led India to its lowest point in 
Corruption Perception Index.  
• The Survey introduces “trust as a 
public good that gets enhanced with 
greater use”. If there is high trust, 
economic activity can flourish despite 
the increased potential for opportunism. 
• To enhance this public good, survey suggests that  
Page 3


 
 
1 
                   
ECONOMIC SURVEY SUMMARY 2020 - VOLUME I & II 
Table of Contents 
VOLUME - I _____________________________________________________________________ 2 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST ___ 2 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS ____________ 4 
CHAPTER 3: PRO-BUSINESS VS PRO-CRONY ___________________________________________ 6 
CHAPTER 4: UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE 
THAN IT HELPS __________________________________________________________________ 9 
CHAPTER 5: CREATING JOBS AND GROWTH BY SPECIALIZING TO EXPORTS IN NETWORK 
PRODUCTS ____________________________________________________________________ 13 
CHAPTER 6: TARGETING EASE OF DOING BUSINESS IN INDIA ____________________________ 16 
CHAPTER 7: GOLDEN JUBLEE OF BANK NATIONALIZATION: TAKING STOCK ________________ 19 
CHAPTER 8: FINANCIAL FRAGILITY IN THE NBFC SECTOR _______________________________ 22 
CHAPTER 9: PRIVATIZATION AND WEALTH CREATION _________________________________ 24 
CHAPTER 10: IS INDIA’S GDP GROWTH OVERSTATED? NO! _____________________________ 26 
CHAPTER 11: THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA ______________ 27 
VOLUME - II ___________________________________________________________________ 28 
CHAPTER 1: STATE OF THE ECONOMY ______________________________________________ 28 
CHAPTER 2: FISCAL DEVELOPMENTS _______________________________________________ 31 
CHAPTER 3: EXTERNAL SECTOR ____________________________________________________ 35 
CHAPTER 4: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 
CHAPTER 5: PRICES AND INFLATION ________________________________________________ 44 
CHAPTER 6: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 47 
CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 52 
CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 57 
CHAPTER 9: SERVICES SECTOR ____________________________________________________ 62 
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 65 
 
 
  
 
 
 
 
 
 
2 
                    
VOLUME - I 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE 
HAND SUPPORTED BY THE HAND OF TRUST  
Theme  
This chapter uses ideas from ancient literatures such as Arthashastra that supports the importance of 
ethical wealth creation for the growth and economic development of India. In doing so, the chapter 
highlighted the role played by the market in creating that ethical wealth and how the government can 
enable an environment of trust for those markets to thrive. 
Importance of Wealth creation 
• Survey notes that our age-old traditions have always 
commended wealth creation that made India a 
significant contributor to world’s GDP for more than 
three-fourths of known economic history. 
• The contemporary evidence to this ancient thinking is 
reflected by the exponential rise in India’s GDP and 
GDP per capita post economic liberalisation in 1991 
and corresponding wealth generation in the stock 
market.  
• The survey after collating data from top 100 wealthy entrepreneurs in the country as estimated by 
Forbes, showed how wealth created by an ethical company correlates strongly with the benefits that 
accrue to the employees of the company, suppliers of raw material to the company, government and to 
the common citizens of the country. 
Wealth Creation through the invisible hand of markets  
• The market economy is based on the principle that optimal allocation of resources occurs when 
citizens are able to exercise free choice in the products or services they want.  
• The survey highlighted that there still exists a scepticism about the benefits accruing from enabling 
the invisible hand of market i.e. increasing economic openness of our country and that scepticism has 
to go for India to grow. 
• To support this argument, survey has taken examples from different sectors such as banking, mutual 
funds, ports, etc. to show that since 1991, sectors that were liberalized grew significantly faster than 
those that remain closed.  
The breakdown of trust in the early years of this millennium  
• In a market economy too, there is need for state to ensure a moral hand to support the invisible hand 
as markets are liable to debase ethics 
in the pursuit of profits at all cost.  
• As in the case of the Global Financial 
Crisis, the events of 2011-13 and the 
consequences that have followed have 
created a trust deficit in the economy 
which led India to its lowest point in 
Corruption Perception Index.  
• The Survey introduces “trust as a 
public good that gets enhanced with 
greater use”. If there is high trust, 
economic activity can flourish despite 
the increased potential for opportunism. 
• To enhance this public good, survey suggests that  
 
 
3 
                   
o Reducing information asymmetry through standardising enforcement systems and public databases 
thus empowering transparency.  
o Enhancing quality of supervision through significant enhancement in the quantity and quality of 
manpower in our regulators (CCI, RBI, SEBI, IBBI) together with significant investments in 
technology and analytics needs to be made.  
The instruments for Wealth Creation 
• The survey through its various chapters, suggested in detail, the ways and means to enhance ethical 
wealth creation in India. These are: 
o Equal opportunities for Entrepreneurs: the chapter analyses how equal opportunity for new 
entrants in entrepreneurship enables efficient resource allocation and utilization, facilitates job 
growth, promotes trade growth and consumer surplus through greater product variety, and 
increases the overall boundaries of economic activity.  
o Pro-business versus pro-crony: This chapter presents evidences on how efficient the Indian 
economy has been in terms of opportunity for new entrants against established players for wealth 
creation.  
o Government intervention: Here the survey discusses how the command and control approach of 
government in some areas are limiting the efficient functioning of markets in those areas.  
o Specialising exports: Here the survey analyses how integrating “Assemble in India” into “Make in 
India” will lead to creation of jobs in labour intensive industries and thereby increasing exports. 
o Ease of doing business: In this chapter, the survey discussed how reforms taken during the last 5 
years have led to improvement in India’s EODB rankings.  
o Banking Sector: The survey in this chapter highlighted that India’s banking sector is 
disproportionately under-developed given the size of its economy and suggests some solutions that 
can make PSBs more efficient.  
o Fragility in NBFC sector: The chapter constructs a diagnostic to track the health of the shadow 
banking sector and thereby monitor systemic risk in the financial sector.  
o Privatisation: The chapter uses the change in performance of Central Public Sector Enterprises 
(CPSEs) after privatization to show the significant efficiency gains that are obtained when the 
private sector runs businesses instead of the government.  
o Role of GDP numbers: The Survey in this chapter provides careful evidence that India’s GDP growth 
estimates can be trusted and there is no evidence of mis-estimation of India’s GDP growth.  
o Thalinomics: This chapter aims to relate economics to the common person using something that he 
or she encounters every day – a plate of food.  
Conclusion 
The wealth acquired capably without causing any harm yields righteousness and joy. Only when wealth is 
created will wealth be distributed. India’s aspiration to become a $5 trillion economy depends critically on 
creation of wealth by strengthening the invisible hand of markets and supporting it with the hand of trust.  
Trust Definition (as per the Survey) 
• Trust: The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”. Trust can be 
conceptualized as a public good with the characteristics of-  
o Non-excludability: The citizens can enjoy its benefits at no explicit financial cost. 
o Non-rival consumption: The marginal cost of supplying this public good to an extra citizen is zero. It is also  
o Non-rejectable:  Collective supply for all citizens means that it cannot be rejected.   
• Historical reference for Economic Policy as a trust enabler: 
o Machiavelli’s Approach: It views people as “knaves” (inherently dishonest) and thus advocates regulation 
through orders in penalties.  
o Aristotle’s Approach: Aristotle holds that “good laws make good citizens,” by inculcating habits and social 
virtue. Thus suggests that people be regulated by “ritual” rather than by orders and penalties. 
o Kautilya’s Approach: Kautilya in Arthashastra highlights the idea of Anvikshiki (philosophical and ethical 
framework). It reinforces the idea of “invisible hand” but emphasizes equally the importance of “mutual 
sympathy” (i.e. trust). 
o From these examples it is evident that the idea of trust as a public good is not novel and has some historical 
backing.   
Page 4


 
 
1 
                   
ECONOMIC SURVEY SUMMARY 2020 - VOLUME I & II 
Table of Contents 
VOLUME - I _____________________________________________________________________ 2 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST ___ 2 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS ____________ 4 
CHAPTER 3: PRO-BUSINESS VS PRO-CRONY ___________________________________________ 6 
CHAPTER 4: UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE 
THAN IT HELPS __________________________________________________________________ 9 
CHAPTER 5: CREATING JOBS AND GROWTH BY SPECIALIZING TO EXPORTS IN NETWORK 
PRODUCTS ____________________________________________________________________ 13 
CHAPTER 6: TARGETING EASE OF DOING BUSINESS IN INDIA ____________________________ 16 
CHAPTER 7: GOLDEN JUBLEE OF BANK NATIONALIZATION: TAKING STOCK ________________ 19 
CHAPTER 8: FINANCIAL FRAGILITY IN THE NBFC SECTOR _______________________________ 22 
CHAPTER 9: PRIVATIZATION AND WEALTH CREATION _________________________________ 24 
CHAPTER 10: IS INDIA’S GDP GROWTH OVERSTATED? NO! _____________________________ 26 
CHAPTER 11: THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA ______________ 27 
VOLUME - II ___________________________________________________________________ 28 
CHAPTER 1: STATE OF THE ECONOMY ______________________________________________ 28 
CHAPTER 2: FISCAL DEVELOPMENTS _______________________________________________ 31 
CHAPTER 3: EXTERNAL SECTOR ____________________________________________________ 35 
CHAPTER 4: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 
CHAPTER 5: PRICES AND INFLATION ________________________________________________ 44 
CHAPTER 6: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 47 
CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 52 
CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 57 
CHAPTER 9: SERVICES SECTOR ____________________________________________________ 62 
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 65 
 
 
  
 
 
 
 
 
 
2 
                    
VOLUME - I 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE 
HAND SUPPORTED BY THE HAND OF TRUST  
Theme  
This chapter uses ideas from ancient literatures such as Arthashastra that supports the importance of 
ethical wealth creation for the growth and economic development of India. In doing so, the chapter 
highlighted the role played by the market in creating that ethical wealth and how the government can 
enable an environment of trust for those markets to thrive. 
Importance of Wealth creation 
• Survey notes that our age-old traditions have always 
commended wealth creation that made India a 
significant contributor to world’s GDP for more than 
three-fourths of known economic history. 
• The contemporary evidence to this ancient thinking is 
reflected by the exponential rise in India’s GDP and 
GDP per capita post economic liberalisation in 1991 
and corresponding wealth generation in the stock 
market.  
• The survey after collating data from top 100 wealthy entrepreneurs in the country as estimated by 
Forbes, showed how wealth created by an ethical company correlates strongly with the benefits that 
accrue to the employees of the company, suppliers of raw material to the company, government and to 
the common citizens of the country. 
Wealth Creation through the invisible hand of markets  
• The market economy is based on the principle that optimal allocation of resources occurs when 
citizens are able to exercise free choice in the products or services they want.  
• The survey highlighted that there still exists a scepticism about the benefits accruing from enabling 
the invisible hand of market i.e. increasing economic openness of our country and that scepticism has 
to go for India to grow. 
• To support this argument, survey has taken examples from different sectors such as banking, mutual 
funds, ports, etc. to show that since 1991, sectors that were liberalized grew significantly faster than 
those that remain closed.  
The breakdown of trust in the early years of this millennium  
• In a market economy too, there is need for state to ensure a moral hand to support the invisible hand 
as markets are liable to debase ethics 
in the pursuit of profits at all cost.  
• As in the case of the Global Financial 
Crisis, the events of 2011-13 and the 
consequences that have followed have 
created a trust deficit in the economy 
which led India to its lowest point in 
Corruption Perception Index.  
• The Survey introduces “trust as a 
public good that gets enhanced with 
greater use”. If there is high trust, 
economic activity can flourish despite 
the increased potential for opportunism. 
• To enhance this public good, survey suggests that  
 
 
3 
                   
o Reducing information asymmetry through standardising enforcement systems and public databases 
thus empowering transparency.  
o Enhancing quality of supervision through significant enhancement in the quantity and quality of 
manpower in our regulators (CCI, RBI, SEBI, IBBI) together with significant investments in 
technology and analytics needs to be made.  
The instruments for Wealth Creation 
• The survey through its various chapters, suggested in detail, the ways and means to enhance ethical 
wealth creation in India. These are: 
o Equal opportunities for Entrepreneurs: the chapter analyses how equal opportunity for new 
entrants in entrepreneurship enables efficient resource allocation and utilization, facilitates job 
growth, promotes trade growth and consumer surplus through greater product variety, and 
increases the overall boundaries of economic activity.  
o Pro-business versus pro-crony: This chapter presents evidences on how efficient the Indian 
economy has been in terms of opportunity for new entrants against established players for wealth 
creation.  
o Government intervention: Here the survey discusses how the command and control approach of 
government in some areas are limiting the efficient functioning of markets in those areas.  
o Specialising exports: Here the survey analyses how integrating “Assemble in India” into “Make in 
India” will lead to creation of jobs in labour intensive industries and thereby increasing exports. 
o Ease of doing business: In this chapter, the survey discussed how reforms taken during the last 5 
years have led to improvement in India’s EODB rankings.  
o Banking Sector: The survey in this chapter highlighted that India’s banking sector is 
disproportionately under-developed given the size of its economy and suggests some solutions that 
can make PSBs more efficient.  
o Fragility in NBFC sector: The chapter constructs a diagnostic to track the health of the shadow 
banking sector and thereby monitor systemic risk in the financial sector.  
o Privatisation: The chapter uses the change in performance of Central Public Sector Enterprises 
(CPSEs) after privatization to show the significant efficiency gains that are obtained when the 
private sector runs businesses instead of the government.  
o Role of GDP numbers: The Survey in this chapter provides careful evidence that India’s GDP growth 
estimates can be trusted and there is no evidence of mis-estimation of India’s GDP growth.  
o Thalinomics: This chapter aims to relate economics to the common person using something that he 
or she encounters every day – a plate of food.  
Conclusion 
The wealth acquired capably without causing any harm yields righteousness and joy. Only when wealth is 
created will wealth be distributed. India’s aspiration to become a $5 trillion economy depends critically on 
creation of wealth by strengthening the invisible hand of markets and supporting it with the hand of trust.  
Trust Definition (as per the Survey) 
• Trust: The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”. Trust can be 
conceptualized as a public good with the characteristics of-  
o Non-excludability: The citizens can enjoy its benefits at no explicit financial cost. 
o Non-rival consumption: The marginal cost of supplying this public good to an extra citizen is zero. It is also  
o Non-rejectable:  Collective supply for all citizens means that it cannot be rejected.   
• Historical reference for Economic Policy as a trust enabler: 
o Machiavelli’s Approach: It views people as “knaves” (inherently dishonest) and thus advocates regulation 
through orders in penalties.  
o Aristotle’s Approach: Aristotle holds that “good laws make good citizens,” by inculcating habits and social 
virtue. Thus suggests that people be regulated by “ritual” rather than by orders and penalties. 
o Kautilya’s Approach: Kautilya in Arthashastra highlights the idea of Anvikshiki (philosophical and ethical 
framework). It reinforces the idea of “invisible hand” but emphasizes equally the importance of “mutual 
sympathy” (i.e. trust). 
o From these examples it is evident that the idea of trust as a public good is not novel and has some historical 
backing.   
 
 
4 
                   
Trends 
• India has the 3rd largest entrepreneurship ecosystem in the world 
ahead of the countries such as Brazil and South Korea. 
• New firm creation has gone up dramatically in India since 2014. As a 
result, 1,24,000 new firms were created in 2018 up from 70,000 in 
2014. This growth is particularly pronounced for the services sector 
reflecting India’s new economic structure.  
 
• Entrepreneurial intensity (i.e. number of new firms registered per 
year per 1000 workers) in formal economy, is low in India compared 
to other developed economies as large number of India’s enterprises 
operate in the informal economy. 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH 
CREATION AT THE GRASSROOTS 
Theme 
This chapter examines the contribution of formal entrepreneurial activities to wealth generation and 
employment growth, drivers of such entrepreneurial activities and their spatial distribution at the bottom 
of the administrative pyramid i.e. across 500 districts in India. Using the learnings, the chapter suggests 
policy changes to foster entrepreneurship and thereby job and wealth creation in the country. 
Entrepreneurship and GDP 
• The survey suggests that 
entrepreneurial activity has a 
significant positive impact on 
Gross Domestic District 
Product (GDDP).  
o With 10 per cent increase 
in registration of new 
firms per district-year, 
GDDP increases by 1.8 
per cent. 
o Impact of new firm entry 
on GDDP is greatest in 
the Manufacturing and 
Services sectors. 
o Thus, entrepreneurial 
activity in the formal 
sector at the grassroot 
level is not driven by 
necessity or lack of 
alternate employment options. Rather these activities are productive and growth-focused.  
• There exists a spatial heterogeneity in distribution of Entrepreneurial Activity in India i.e. varied level of 
entrepreneurial activity across the districts.  
o The survey finds that all four regions except certain eastern states in India demonstrate strong 
growth in entrepreneurial activity over time.   
o However, irrespective of the level of entrepreneurial activity, all regions demonstrate a strong 
relationship between entrepreneurship and GDDP signifying the pervasive benefits of 
entrepreneurship.  
• According to the survey, entrepreneurial activities across different sectors of economy also varies 
across the districts. 
Agriculture sector Manufacturing sector Services sector Infrastructure sector 
Highest in the regions 
of Manipur, 
Meghalaya, Madhya 
Pradesh, Assam, 
Tripura and Orissa. 
Highest in the regions of 
Gujarat, Meghalaya, 
Puducherry, Punjab and 
Rajasthan. 
Highest in the regions 
of Delhi, Mizoram, Uttar 
Pradesh, Kerala, 
Andaman and Nicobar, 
and Haryana.  
Highest in the regions of Jharkhand, 
Arunachal Pradesh, Himachal 
Pradesh, Mizoram, Jammu and 
Kashmir and Bihar 
• As compared to other sectors, there exists a high negative spatial correlation between entrepreneurial 
activity in manufacturing sectors and unemployment rate in the district which means that 
unemployment rate reduces significantly when new firms in the manufacturing sectors increase. 
 
 
Page 5


 
 
1 
                   
ECONOMIC SURVEY SUMMARY 2020 - VOLUME I & II 
Table of Contents 
VOLUME - I _____________________________________________________________________ 2 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE HAND SUPPORTED BY THE HAND OF TRUST ___ 2 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH CREATION AT THE GRASSROOTS ____________ 4 
CHAPTER 3: PRO-BUSINESS VS PRO-CRONY ___________________________________________ 6 
CHAPTER 4: UNDERMINING MARKETS: WHEN GOVERNMENT INTERVENTION HURTS MORE 
THAN IT HELPS __________________________________________________________________ 9 
CHAPTER 5: CREATING JOBS AND GROWTH BY SPECIALIZING TO EXPORTS IN NETWORK 
PRODUCTS ____________________________________________________________________ 13 
CHAPTER 6: TARGETING EASE OF DOING BUSINESS IN INDIA ____________________________ 16 
CHAPTER 7: GOLDEN JUBLEE OF BANK NATIONALIZATION: TAKING STOCK ________________ 19 
CHAPTER 8: FINANCIAL FRAGILITY IN THE NBFC SECTOR _______________________________ 22 
CHAPTER 9: PRIVATIZATION AND WEALTH CREATION _________________________________ 24 
CHAPTER 10: IS INDIA’S GDP GROWTH OVERSTATED? NO! _____________________________ 26 
CHAPTER 11: THALINOMICS: THE ECONOMICS OF A PLATE OF FOOD IN INDIA ______________ 27 
VOLUME - II ___________________________________________________________________ 28 
CHAPTER 1: STATE OF THE ECONOMY ______________________________________________ 28 
CHAPTER 2: FISCAL DEVELOPMENTS _______________________________________________ 31 
CHAPTER 3: EXTERNAL SECTOR ____________________________________________________ 35 
CHAPTER 4: MONETARY MANAGEMENT AND FINANCIAL INTERMEDIATION _______________ 40 
CHAPTER 5: PRICES AND INFLATION ________________________________________________ 44 
CHAPTER 6: SUSTAINABLE DEVELOPMENT AND CLIMATE CHANGE _______________________ 47 
CHAPTER 7: AGRICULTURE AND FOOD MANAGEMENT ________________________________ 52 
CHAPTER 8: INDUSTRY AND INFRASTRUCTURE _______________________________________ 57 
CHAPTER 9: SERVICES SECTOR ____________________________________________________ 62 
CHAPTER 10: SOCIAL INFRASTRUCTURE, EMPLOYMENT AND HUMAN DEVELOPMENT _______ 65 
 
 
  
 
 
 
 
 
 
2 
                    
VOLUME - I 
CHAPTER 1: WEALTH CREATION: THE INVISIBLE 
HAND SUPPORTED BY THE HAND OF TRUST  
Theme  
This chapter uses ideas from ancient literatures such as Arthashastra that supports the importance of 
ethical wealth creation for the growth and economic development of India. In doing so, the chapter 
highlighted the role played by the market in creating that ethical wealth and how the government can 
enable an environment of trust for those markets to thrive. 
Importance of Wealth creation 
• Survey notes that our age-old traditions have always 
commended wealth creation that made India a 
significant contributor to world’s GDP for more than 
three-fourths of known economic history. 
• The contemporary evidence to this ancient thinking is 
reflected by the exponential rise in India’s GDP and 
GDP per capita post economic liberalisation in 1991 
and corresponding wealth generation in the stock 
market.  
• The survey after collating data from top 100 wealthy entrepreneurs in the country as estimated by 
Forbes, showed how wealth created by an ethical company correlates strongly with the benefits that 
accrue to the employees of the company, suppliers of raw material to the company, government and to 
the common citizens of the country. 
Wealth Creation through the invisible hand of markets  
• The market economy is based on the principle that optimal allocation of resources occurs when 
citizens are able to exercise free choice in the products or services they want.  
• The survey highlighted that there still exists a scepticism about the benefits accruing from enabling 
the invisible hand of market i.e. increasing economic openness of our country and that scepticism has 
to go for India to grow. 
• To support this argument, survey has taken examples from different sectors such as banking, mutual 
funds, ports, etc. to show that since 1991, sectors that were liberalized grew significantly faster than 
those that remain closed.  
The breakdown of trust in the early years of this millennium  
• In a market economy too, there is need for state to ensure a moral hand to support the invisible hand 
as markets are liable to debase ethics 
in the pursuit of profits at all cost.  
• As in the case of the Global Financial 
Crisis, the events of 2011-13 and the 
consequences that have followed have 
created a trust deficit in the economy 
which led India to its lowest point in 
Corruption Perception Index.  
• The Survey introduces “trust as a 
public good that gets enhanced with 
greater use”. If there is high trust, 
economic activity can flourish despite 
the increased potential for opportunism. 
• To enhance this public good, survey suggests that  
 
 
3 
                   
o Reducing information asymmetry through standardising enforcement systems and public databases 
thus empowering transparency.  
o Enhancing quality of supervision through significant enhancement in the quantity and quality of 
manpower in our regulators (CCI, RBI, SEBI, IBBI) together with significant investments in 
technology and analytics needs to be made.  
The instruments for Wealth Creation 
• The survey through its various chapters, suggested in detail, the ways and means to enhance ethical 
wealth creation in India. These are: 
o Equal opportunities for Entrepreneurs: the chapter analyses how equal opportunity for new 
entrants in entrepreneurship enables efficient resource allocation and utilization, facilitates job 
growth, promotes trade growth and consumer surplus through greater product variety, and 
increases the overall boundaries of economic activity.  
o Pro-business versus pro-crony: This chapter presents evidences on how efficient the Indian 
economy has been in terms of opportunity for new entrants against established players for wealth 
creation.  
o Government intervention: Here the survey discusses how the command and control approach of 
government in some areas are limiting the efficient functioning of markets in those areas.  
o Specialising exports: Here the survey analyses how integrating “Assemble in India” into “Make in 
India” will lead to creation of jobs in labour intensive industries and thereby increasing exports. 
o Ease of doing business: In this chapter, the survey discussed how reforms taken during the last 5 
years have led to improvement in India’s EODB rankings.  
o Banking Sector: The survey in this chapter highlighted that India’s banking sector is 
disproportionately under-developed given the size of its economy and suggests some solutions that 
can make PSBs more efficient.  
o Fragility in NBFC sector: The chapter constructs a diagnostic to track the health of the shadow 
banking sector and thereby monitor systemic risk in the financial sector.  
o Privatisation: The chapter uses the change in performance of Central Public Sector Enterprises 
(CPSEs) after privatization to show the significant efficiency gains that are obtained when the 
private sector runs businesses instead of the government.  
o Role of GDP numbers: The Survey in this chapter provides careful evidence that India’s GDP growth 
estimates can be trusted and there is no evidence of mis-estimation of India’s GDP growth.  
o Thalinomics: This chapter aims to relate economics to the common person using something that he 
or she encounters every day – a plate of food.  
Conclusion 
The wealth acquired capably without causing any harm yields righteousness and joy. Only when wealth is 
created will wealth be distributed. India’s aspiration to become a $5 trillion economy depends critically on 
creation of wealth by strengthening the invisible hand of markets and supporting it with the hand of trust.  
Trust Definition (as per the Survey) 
• Trust: The Survey introduces the idea of “trust as a public good that gets enhanced with greater use”. Trust can be 
conceptualized as a public good with the characteristics of-  
o Non-excludability: The citizens can enjoy its benefits at no explicit financial cost. 
o Non-rival consumption: The marginal cost of supplying this public good to an extra citizen is zero. It is also  
o Non-rejectable:  Collective supply for all citizens means that it cannot be rejected.   
• Historical reference for Economic Policy as a trust enabler: 
o Machiavelli’s Approach: It views people as “knaves” (inherently dishonest) and thus advocates regulation 
through orders in penalties.  
o Aristotle’s Approach: Aristotle holds that “good laws make good citizens,” by inculcating habits and social 
virtue. Thus suggests that people be regulated by “ritual” rather than by orders and penalties. 
o Kautilya’s Approach: Kautilya in Arthashastra highlights the idea of Anvikshiki (philosophical and ethical 
framework). It reinforces the idea of “invisible hand” but emphasizes equally the importance of “mutual 
sympathy” (i.e. trust). 
o From these examples it is evident that the idea of trust as a public good is not novel and has some historical 
backing.   
 
 
4 
                   
Trends 
• India has the 3rd largest entrepreneurship ecosystem in the world 
ahead of the countries such as Brazil and South Korea. 
• New firm creation has gone up dramatically in India since 2014. As a 
result, 1,24,000 new firms were created in 2018 up from 70,000 in 
2014. This growth is particularly pronounced for the services sector 
reflecting India’s new economic structure.  
 
• Entrepreneurial intensity (i.e. number of new firms registered per 
year per 1000 workers) in formal economy, is low in India compared 
to other developed economies as large number of India’s enterprises 
operate in the informal economy. 
CHAPTER 2: ENTREPRENEURSHIP AND WEALTH 
CREATION AT THE GRASSROOTS 
Theme 
This chapter examines the contribution of formal entrepreneurial activities to wealth generation and 
employment growth, drivers of such entrepreneurial activities and their spatial distribution at the bottom 
of the administrative pyramid i.e. across 500 districts in India. Using the learnings, the chapter suggests 
policy changes to foster entrepreneurship and thereby job and wealth creation in the country. 
Entrepreneurship and GDP 
• The survey suggests that 
entrepreneurial activity has a 
significant positive impact on 
Gross Domestic District 
Product (GDDP).  
o With 10 per cent increase 
in registration of new 
firms per district-year, 
GDDP increases by 1.8 
per cent. 
o Impact of new firm entry 
on GDDP is greatest in 
the Manufacturing and 
Services sectors. 
o Thus, entrepreneurial 
activity in the formal 
sector at the grassroot 
level is not driven by 
necessity or lack of 
alternate employment options. Rather these activities are productive and growth-focused.  
• There exists a spatial heterogeneity in distribution of Entrepreneurial Activity in India i.e. varied level of 
entrepreneurial activity across the districts.  
o The survey finds that all four regions except certain eastern states in India demonstrate strong 
growth in entrepreneurial activity over time.   
o However, irrespective of the level of entrepreneurial activity, all regions demonstrate a strong 
relationship between entrepreneurship and GDDP signifying the pervasive benefits of 
entrepreneurship.  
• According to the survey, entrepreneurial activities across different sectors of economy also varies 
across the districts. 
Agriculture sector Manufacturing sector Services sector Infrastructure sector 
Highest in the regions 
of Manipur, 
Meghalaya, Madhya 
Pradesh, Assam, 
Tripura and Orissa. 
Highest in the regions of 
Gujarat, Meghalaya, 
Puducherry, Punjab and 
Rajasthan. 
Highest in the regions 
of Delhi, Mizoram, Uttar 
Pradesh, Kerala, 
Andaman and Nicobar, 
and Haryana.  
Highest in the regions of Jharkhand, 
Arunachal Pradesh, Himachal 
Pradesh, Mizoram, Jammu and 
Kashmir and Bihar 
• As compared to other sectors, there exists a high negative spatial correlation between entrepreneurial 
activity in manufacturing sectors and unemployment rate in the district which means that 
unemployment rate reduces significantly when new firms in the manufacturing sectors increase. 
 
 
 
 
5 
                   
Determinants of Entrepreneurial activity  
Apart from local population characteristics, district-level conditions, and agglomeration economies, the 
survey highlighted two key drivers of heterogeneity in district level Entrepreneurial activity: 
• Physical infrastructure: that includes basic physical infrastructure such as roads, electricity, water etc. 
and proximity to large population centres. Superior physical infrastructure will likely promote 
entrepreneurial activity and allows the start-up to expand markets and scale operations.  
o However, the survey found that there exists a threshold beyond which increase in physical 
infrastructure gives diminishing returns, i.e. beyond a point, increased access to local markets may 
create hyper-competition and discourage entrepreneurship.  
o At the same time, increased levels of basic infrastructure development might also open up 
potential entrepreneurs to other opportunities and consequently, decrease the incentives to 
become entrepreneurs.  
• Social Infrastructure: that includes education level in a district identified through proportion of the 
literate population and number of colleges. Higher education levels in a district enable the 
development of better human capital that relates to increased supply of ideas and entrepreneurs and 
the largest increases appear when literacy rises above 72 per cent.  
o The survey found no such threshold as in the case of physical infrastructure. Increasing literacy 
levels or the formation of new colleges appear to increase the number of new firms monotonically. 
 
 
 
Policy Measures for Fast-Tracking Entrepreneurship and Wealth Creation 
• Given the relatively higher economic contribution of entrepreneurial activity in the manufacturing 
sector and its high employment generation potential, it is important for states to consider policy levers 
that enable transition of labour and resources from less productive sectors and subsistence activity in 
the informal sector to these relatively more productive establishments.  
• Increasing literacy rates by setting up of more schools and colleges along with privatisation of school 
education to augment education capacity at all levels. 
• Investments in infrastructure especially those undertaken to increase entrepreneurial activity should 
be weighed against how improved infrastructure creates other kinds of opportunities that might be 
consequential to a district’s GDDP.