Economic Survey 2016-17
Economic Survey is a very important document prepared by the government. It is considered a fairly objective document. All students of competitive exams must know have good knowledge about it. Major highlights of Economic Survey 2016-17 are given below for the benefit of visitors to my website and page. My comments are in brackets.
Highlights: Economic Survey 2016-17
- Growth Forecast: Gross domestic product (GDP) growth in 2016-17 pegged at 6.5%, down from 7.6% in last fiscal 2015-16. Economic growth to rebound to 6.75 to 7.5% in 2017-18.
- Farm sector to grow at 4.1% in 2016-17, up from 1.2% in 2015-16 ( This is thanks to a good monsoon & despite the ill effects of demonetization)
- Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17 from 7.4% in 2015-16.(This shows the impact of demonetization in addition to weak domestic demand and global economy).
- Service sector is estimated to grow at 8.9% in 2016-17.
- GST and other structural reforms should take the growth rate trend to 8-10%.
- Prescribes cut in individual Income Tax rates, real estate stamp duties. IT net could be widened gradually by encompassing all high income earners. Time table for cutting corporate tax should be accelerated. Tax administration could be improved to reduce discretion and improve accountability.
- Goods and Services Tax (GST): Fiscal gains from GST will take time to realize.
- Fiscal Deficit:
- Implementation of muted tax receipts, wage hike to put pressure on fiscal deficit in 2017-18.
- For fiscal health of the economy fiscal prudence for both centre and states is needed.
- Fiscal windfall from low oil prices to disappear in 2017-18.
- Inflation: The average consumer price index (CPI) inflation rate declined to 4.9% in 2015-16 from 5.9% in 2014-15. CPI-based core inflation remained sticky around 5% in the 2016-17.
- Oil prices, seen rising by one-sixth in 2017-18 over the previous fiscal 2016-17 prices which could dampen India’s economic growth.
- Monetary Policy:
- Monetary easing headroom may be capped due to sharp rise in prices in 2017-18.
- Market interest rates seen lower in 2017-18 due to demonetization.
- Government Debt to GDP ratio: It was 68.5% in 2016, down from 69.1% in 2015.
- Banking: Suggests setting up public sector asset rehabilitation agency (PSARA) to take charge of large bad loans in banks. With government backing, PSARA can overcome coordination and political issues on bad loans. (The suggestion was not accepted by the government).
- Demonetization: The adverse impact of demonetization on GDP growth will be transitional. It will affect growth rate by 0.25-0.5%, but to have long-term benefits It may affect supplies of certain agricultural products like sugar, milk, potatoes and onions. Remonetization will ensure that the cash squeeze is eliminated by April 2017. (I don’t believe this figure. The impact is in the zone of -1% and will continue in the next year as well. The small industries which closed down were impacted for life!).
- Universal Basic Income (UBI): Advocates the concept of UBI as an alternative to the various social welfare schemes in an effort to reduce poverty. It will be an alternative to the plethora of state subsidies for poverty alleviation. UBI would cost between 4 and 5% of GDP. (The idea is attractive as it eliminates the leakages of all welfare schemes. It was discussed in a blog earlier.)