Economic Survey | Budget 2019: Resolution of twin balance sheet problem, bankruptcy law led to investment turnaround, says Economic Survey

Economy


Measures taken to reduce the twin balance sheet problem and the insolvency and bankruptcy code have led to an improvement in the investment climate within the economy, the Economic Survey pointed out.

“The continued resolution of the twin balance sheet problem following implementation of Insolvency and Bankruptcy Code 2016 and recapitalization of banks helped to promote investment,” said the Economic Survey.

The investment climate within the economy turned around post 2017-18 on the back of reducing uncertainty on the economic policy front.

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The Survey said that the Indian economy has been resilient even during rising global uncertainty.

“Gross fixed capital formation as a proportion of GDP, commonly referred to as the fixed investment rate, fell from 37 per cent in 2007-08 to 27 per cent in the following ten years but has since recovered to approximately 28 per cent recently. While several factors led to the investment slowdown till 2017-18, inter-alia, including the twin balance sheet problem discussed in detail in Economic Survey 2016-17, we show that a secular trend of reducing economic policy uncertainty may have helped to foster the turnaround in investment activity,” the Survey said.

The Economic Survey has pointed out that the economic policy uncertainty index in India has trended downwards post 2015 diverging from the international trend.

“Economic policy uncertainty in India moved closely in tandem with global uncertainty until 2014. However, it started diverging since early 2015 and seems to have completely decoupled in 2018,” the Economic Survey for 2018-19 said.



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