Highlights of Economic Survey 2016-17- Volume 2

Introduction

Economic Survey 2016-17 Volume 2 was presented in the Parliament on August 11, 2017.Various highlights of the survey are as follows:
Regarding the Outlook for Growth 2017-18, Survey (Volume I) forecasted the real GDP growth of 6.75 percent to 7.5 percent for FY 2018.
For Outlook for Prices & Inflation 2017-18, the Survey notes that the inflation in the near-term will be determined by certain factors, including:

  • the outlook and policy in advanced economies, especially the US;
  • the recent nominal exchange rate appreciation;
  • the monsoon;
  • the introduction of the GST
  • the 7th Pay Commission awards;
  • likely farm loan waivers; and
  • the output gap
As the current inflation is running below the 4 percent target, it suggests that inflation by March 2018 is likely to be below the RBI’s medium term target of 4 percent.

Fiscal Developments

1. The fiscal outcome of the Central Government in 2016-17 was due to:
strong growth in tax revenue,
maintenance of capital spending
consolidation of non-salary/pension revenue expenditure.
These reasons allowed the Government to hold the fiscal deficit to 3.5 per cent of GDP in 2016-17.

2. The Union Budget for 2017-18 opted for a gradual fiscal consolidation path: 
the fiscal deficit is expected to decline to 3.2 percent of GDP in 2017-2018 and deficit of 3 percent is projected to be achieved in 2018-2019.

3. The Budget for 2017-18 introduced a number of reforms:
Integrated Railway Budget with the Union Budget;
Advanced the date of the Union Budget by a month; (To Feb 1)
Eliminated classification of expenditure into ‘plan’ and ‘non-plan’;
Restructured the Medium Term Expenditure Framework Statement with projected expenditures.

4. The important fiscal policy initiative is the introduction of the Goods and Services Tax with effect from the 1st day of July 2017.


Monetary Management and Financial Intermediation

i. As of August 2017 Repo rate stood at 6.00 per cent and reverse repo rate at 5.75 per cent
ii. As of 31st March 2017, currency in circulation contracted by 19.7 per cent whereas reserve money contracted by 12.9 per cent.
iii. The average gross bank credit to industry contracted by 0.2 per cent in the FY 2016-17.
iv. The gross non-performing advances (GNPAs) ratio of SCBs, Scheduled commercial Banks rose from 9.2 per cent in September 2016 to 9.5 per cent in March 2017.
v. Zero balance accounts under PMJDY declined consistently from nearly 58 per cent in March 2015 to around 24 per cent as of December 2016.

Prices and Inflation

i. CPI inflation fell to a series low of 1.5 percent in June 2017.
ii. There was a decline in all commodity groups during 2016-17, especially in food.
iii. Most States/UTs witnessed a sharp decline in CPI inflation in 2016-17 as compared to the previous year.
iv. Both rural and urban inflation has declined in 2016-17 and the gap between rural and urban inflation has narrowed down in recent months.

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