Highlights of Economic Survey: 2017

Introduction

The survey was prepared by Chief Economic Advisor Arvind Subramanian and Finance minister Arun Jaitley tabled the Economic survey 2016-2017 in the Parliament budget session. As per the economic survey reports, the growth rate is in the range of 6.75 per cent to 7.25 per cent in the fiscal year 2017-2018, in the post-demonetisation year.
The survey has come up with an interesting concept called as Universal Basic Income as an alternate to various social welfare schemes in an effort to reduce the poverty. The survey clearly states that the adverse impact of demonetisation on GDP growth will be intermediate.

Growth Estimation:

  • The GDP growth came down to 6.5 per cent compared to 7.6 per cent in the last fiscal year. 
  • The service sectors are estimated to grow at 8.9 per cent in 2016-2017. 
  • The current GDP growth rate for 2016-2017 is 7.1 per cent. 
  • Farm sector land had a good growth on account of good monsoon rains and it is estimated to be 4.15 per cent in 2016-2017 compared to 1.2 per cent in 2015-2016. 
  • Industrial sector growth rate pegged down to 5.2 per cent in 2016-2017 compared to 7.4 per cent in the previous year. 

Taxes

  • The survey clearly prescribes that there will be a cut in the individual income tax rates and real estate stamp duties. 
  • High Income earners will be enclosed in the Income Tax net thus, widening of the Income Tax net. 
  • Accountability and administration of Tax Department could be improved by reducing the chances or discretion. 
  • Cutting of Corporate taxes. 
  • The tax net will be widened from 5.5 per cent individuals to more than 20 per cent. 
Read "What is Economic" Survey Here

Fiscal deficit

  • Oil prices were low in the previous year so there was a windfall in fiscal, but in 2017-2018 it would not be the same. 
  • Wage hikes to put pressure on fiscal deficit in 2017-2018. 
  • After implementation of GST there will be a fiscal gains but it will take more time to realise it. 
  • Fiscal responsibility Budget Management (FRBM) policies need to be changed so as to ensure a proper direction for the growth of “future India”. 

Inflation:

  • CPI Inflation was around 4.5 to 5 per cent in 2016-2017. 
  • Oil prices are seen rising by one-sixth in 2017-2018 over the previous financial year 2016-2017 which will hamper our economic growth. 

Current Account deficit:

  • It is around 1-1.15 percent of GDP. 

Monetary Policy:

  • The interest rates are predicted to be low in 2017-2018 due to the demonetisation. 

Banking sector:

  • It was estimated that the capital requirement for banks would be around 1.8 trillion rupees by 2018-2019. 
  • Non-financial companies could be sold out by the government, so as to infuse capital into the banks. 
  • Bad loans are at pace in each and every bank, so economists suggest for setting up a Public Sector Asset Rehabilitation (PSAR) to take charge of large bad loans in banks. 

Demonetisation:

  • It will hamper our growth rate by 0.25-0.5 percent, but it will have long-term benefits. 
  • Agricultural products like milk, potatoes and onions will be affected by this method. 
  • The cash squeeze will be properly eliminated by April 2017, by removing demonetisation and adding it with remonetisation. 

Currency:

  • If capital inflows are weak, then the rupee depreciation will be allowed. 
  • Rupee value can be achieved through monetary relaxation. 

Universal Basic Income:

  • Poverty acts as a major disruption for our Country’s growth, so to ensure that poverty gets reduced. The economic survey of 2016-2017 has advocated the concept of universal basic Income as an alternate to various social welfare schemes. It would cost around 4 to 5 percent of GDP. 

Way Forward:

  • Our economy would expand by 7.5 per cent in year 2017-2018. 
  • GST and various other structural reforms should take the growth rate as 8-10 per cent. 
  • China’s competitiveness is deteriorating due to lower wage costs in our states, so we are well positioned to take advantage of it. 
  • Increase in wage hikes will definitely add a pressure to fiscal deficit in 2017-2018. 

Other Important Points:

  • Labour migration rates in our country are rapidly increasing at a higher rate. 
  • Economic survey suggests for setting up a centralised Public Sector Asset Rehabilitation agency. 
  • Current account deficit is narrowed in first half of 2016-2017 to 0.3 per cent of GDP. 
  • Our country’s trade GDP ratio is now greater than china. 
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