Economic Survey Volume 2
This is a guest blog by Brajesh Prasad.
The Government published the Second Volume of the Economic Survey 2016-17 on 11 Aug 2017. This is in continuation of the First volume which was released in February, this year. Since 2015, the Government has started a new practice of releasing the Economic Survey in two volumes. This year however there is gap of 5 months between the first and the second volumes owing to the advancing of the budget by a month.
A little about Economic Survey
- It is presented by Department of Economic Affairs of the Finance Ministry just before the Union Budget.
- It is prepared under the guidance of the Chief Economic Adviser and the Finance Ministry.
- Economic Survey reviews the developments in the Indian economy over the previous 12 months.
Highlights of Volume 2
- It has come out with a pessimistic view on the growth forecast of 6.75- 7.5 made by the Volume 1 in February, this year. It says that it will be difficult to achieve this growth rate.
- It expects CPI inflation to be below 4 per cent by March this fiscal.
- According to the Survey, the structural reform agenda of the government includes implementing GST, Air India privatization, rationalization of energy subsidies and addressing the twin balance sheet challenge facing banks.
- It said about 5.4 lakh new tax payers have joined the tax net after Demonetization.
- Also, it added that the removal of check posts and easing of transport constraints after GST implementation can provide some short—term fillip to economic activity.
- Financial Inclusion is growing at a steady rate under the Pradhan Mantri Jan Dhan Yojana. Zero balance accounts under PMJDY have declined consistently from nearly 58 per cent in March 2015 to around 24 per cent as of December 2016.
- Industrial Sector grew at a meager rate, IIP shows overall growth rate of 5% in the year 2016-17 as compared to 3.4% last year.
Challenges to the Economy
- Appreciation of rupee; since February, 2017 Rupee has appreciated by about 1.5% which will negatively affect the exports.
- Farm loan waivers in various states have put stress on the government’s fiscal targets.
- Rising stress on the balance sheets of the power and telecom sectors.
- Transition issues arising from implementing the Goods and Services Tax (GST).
The survey said there was “considerable” scope for further easing in monetary policy as the repo rate was 25-75 basis points above the neutral rate.
Agriculture and Food Management
- To address the price risks in agriculture and allied sectors, marketing infrastructure along the entire value chain needs to be built and strengthened.
- To address production risks, the share of irrigated area should be expanded by increasing the coverage of water saving irrigation systems like micro irrigation systems.
- To increase productivity of crops, standards should be set and enforced for better quality, pest and disease resistant seeds.
- Trade and domestic policy changes should be announced well before sowing and should stay till arrivals and procurement is over.
- To enhance women’s involvement in the dairy projects, funds should be earmarked through appropriate mechanisms.
- Providing timely and affordable formal and institutional credit to the small and marginal farmers is the key to inclusive growth.
Industry and Infrastructure
- Railways should go for more non-fare sources along with station redevelopment and commercially exploiting vacant buildings at the station, monetizing land along tracks by leasing out to promote horticulture and tree plantation, and through advertisement and parcel earnings.
- During the last few years the non-major ports are gaining more share of cargo handling compared to major ports. It is required to develop non-major port and also enhance their efficiency and operational capacity.
- Reforms such as privatization/ disinvestment of Air India, creation of aviation hubs and reconsidering the 0/20 rule are some suggestions to improve Indian airlines’ share in the international market.