New Delhi: The Economic Survey 2019 tabled by Union Finance and Corporate Affairs Minister Nirmala Sitharaman in the Parliament on Thursday, strongly emphasized the need to reduce economic policy uncertainty in the country in order to foster a favourable investment climate.
This factor has been termed especially important in context of the Survey’s recommendations for shifting gears to an investment driven growth model for the country.
The Survey has stated that higher economic policy uncertainty discourages investment while predictability of policy action and broad consistency in actual policy attract investment. While noting the reduction in economic policy uncertainty in India over the past decade, the Survey has given a set of recommendations to ensure that it stays at low levels in the coming years to ensure growth in investments.
The Survey goes on to say that based on the globally recognized EPU Index, the economic policy uncertainty in India has reduced significantly over the last decade. Economic Policy Uncertainty was the highest in 2011-12, coinciding with the years of policy paralysis. Since then, it has declined secularly, with intermittent increases in between.
The Survey also notes that economic policy uncertainty in India moved in tandem with global uncertainty till 2014. However it started diverging since early 2015 and seems to have completely decoupled in 2018. In recent times, while the economic policy uncertainty has been increasing across the world, including US, UK and China; India’s Economic Policy Uncertainty has been falling.
The Survey notes that unlike generic economic uncertainty, which cannot be controlled, policymakers can reduce economic policy uncertainty to foster a salutary investment climate in the country.