Union Finance Minister Arun Jaitley tabled the Economic Survey 2016-17, in the Parliament budget session. The survey was prepared by chief economic adviser in the finance ministry, Arvind Subramanian. The survey projects the economy to grow in the range of 6.75% to 7.25% in fiscal year 2017-18, in the post-demonetisation year. It says that the adverse impact of demonetisation on GDP growth will be transitional.
THE MAJOR HIGHLIGHTS ARE:-
- 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 from 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.
- Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17, from 7.4% in 2015-16.
- Service sector is estimated to grow at 8.9% in 2016-17.
- GST, 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 realise.
- Rollout expected to cover pan-India by July 1, 2017.
- 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.
- 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, by 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 easing headroom may be capped, due to sharp rise in prices in 2017-18.
- Market interest rates seen lower in 2017-18, due to demonetisation.
Government Debt to GDP ratio:-
- It was 68.5% in 2016, down from 69.1% in 2015.
- Suggests setting up a public sector asset rehabilitation agency (PSARA) to take charge of large bad loans in banks.
- With government backing, PSAR can overcome coordination and political issues on bad loans.
- The adverse impact of demonetisation on GDP growth will be transitional.
- It will affect growth rate by 0.25-0.5%, but will be having long-term benefits.
- It may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.
- Remonetisation will ensure that the cash squeeze is eliminated by April 2017.
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 alternative to plethora of state subsidies for poverty alleviation.
- UBI would cost between 4-5% of GDP.