The Economic Survey for 2016-17, tabled in the Parliament by Finance Minister Arun Jaitley during the first day of the budget session, underlined the need for more reforms. The survey has been prepared by chief economic adviser Arvind Subramanian. Structurally, the Survey is divided into three sections: The Perspective, The Proximate, and The Persistent.
Section I, provides a broad overview of recent developments and a near-term outlook. It includes chapters that provide a long-term perspective to analyze where India stands on the underlying economic vision, arguing that overcoming some meta-challenges will require broader societal shifts in ideas.
Section II deals with four pressing near-term issues: demonetisation, the festering twin balance sheet challenge and ways to address it, fiscal policy of the center and states, and labour-intensive employment creation. It also includes a review of sectoral developments in the first half of the year.
Section III deals with more medium term issues. There are two broad themes to this section: the states (and cities) and Big Data.
Highlights of Economic Survey 2016-17:
- The survey projects the Indian economy to grow in the range of 6.75% to 7.25% in the next fiscal year 2017-18.
- Growth rate this fiscal to be 6.5 per cent. The central statistics office’s estimate of 7.1 per cent growth for 2016/17 is likely to be revised downwards.
- Farm sector to grow at 4.1% in the current fiscal, up from 1.2% in 2015-16.
- Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17 from 7.4% last fiscal.
- Service sector is estimated to grow at 8.9 per cent in 2016/17.
- Prescribes cut in individual I-T rates, real estate stamp duties.
- Time table for cutting corporate tax should be accelerated
- Income Tax net could be widened gradually by encompassing all high income earners
- Tax administration could be improved to reduce discretion and improve accountability.
- Efforts to collect taxes on disclosed and undisclosed wealth should not lead to tax harassment
- The adverse impact of demonetization on GDP growth will be transitional.
- Demonetization may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.
- It will affect growth rate by 0.25-0.5% but but will have long-term benefits.
- Remonetization will ensure that the cash squeeze is eliminated by April 2017.
- Market interest rates would be seen lower in 2017-18 due to demonetization.
- GST, with other structural reforms should take the trend growth rate to 8-10 per cent.
- Fiscal gains from GST will take time to realize.
- Survey suggests setting up 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.
Universal Basic Income:
- The Economic Survey 2016-17 advocates the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.
- Survey considers Universal Basic Income (UBI) proposal a powerful idea, but not ready for implementation.
- Survey estimates that UBI would cost between 4 and 5 per cent of GDP.
Chapters of Economic Survey 2017:
Section I: The Perspective
Section II: The Proximate
Section III: The Persistent
- The “Other Indias’: Two Analytical Narratives (Redistributive and Natural Resources) on States’ Development
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