NEW DELHI:
A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 per cent this financial year and growth will rise to 7.0-7.5 per cent in 2018-19, thereby re-instating India as the world's fastest-growing major economy, the Economic Survey 2017-18, tabled in Parliament on Monday by Finance Minister Arun Jaitley, said.
The Economic Survey is a report card of the country's financial health.
The Economic Survey, which sets the stage for Finance Minister’s annual budget on Thursday (February 1), forecast that economic management will be challenging in the coming year.
The budget — last full-fledged one before the 2019 general elections — will be presented on February 1. The session is likely to conclude on April 6, with 31 sittings spread over 68 days. Parliament will be adjourned for a recess on February 9 and reassemble on March 5.
The survey was prepared by the finance ministry's Chief Economic Adviser (CEA) Arvind Subramanian, who estimates that gross domestic product will have grown 6.75 per cent in the current fiscal year ending in March.
Subramanian, who prepared the Economic Survey, said in a tweet that growth is reviving after temporary decoupling. There are robust and broad-based signs of revival in economic activity, he added.
The Gross Value Added (GVA) at constant basic prices is expected to grow at the rate of 6.1 per cent in 2017-18 as compared to 6.6 per cent in 2016-17.
However, despite the robust economic growth, savings and investment as a ratio of GDP generally declined. The major reduction in investment rate occurred in 2013-14, although it declined in 2015-16 too. Within this the share of household sector declined, while that of private corporate sector increased.
“India’s unprecedented climb to historic high levels of investment and saving rates in the mid-2000s has been followed by a pronounced, albeit gradual decline. This current episode of investment and saving slowdown is still ongoing. The ratio of domestic saving to GDP reached 29.2 percent in 2013 to a peak of 38.3 percent in 2007, before falling back to 29 percent in 2016. Post which it has been growing” stated the survey document.
The agriculture, industry, and services sectors are expected to grow at the rate of 2.1 per cent, 4.4 per cent, and 8.3 per cent, respectively, in 2017-18.
The survey adds that after remaining in negative territory for a couple of years, growth of exports rebounded into the positive during 2016-17 and was expected to grow faster in 2017-18. However, due to higher expected increase in imports, net exports of goods and services are slated to decline in 2017-18.
The survey says that the launch of GST, resolution of the long-festering bad loans under the Bankruptcy Code, implementation of bank recapitalisation package for public sector banks and further liberalisation of foreign direct investment regime will lift the GDP growth, which began to accelerate from the second half of current fiscal year.
“There has been a 50 percent increase in the number of indirect taxpayers; and a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves the input tax credits,” said the survey.
Focus on Agriculture
The budget session started off with President Ramnath Kovind addressing a joint-sitting of both the houses of the parliament. In his speech, the President said the country has been able to achieve economic growth despite slowdown in the global economy.
"Government is committed to doubling of farmers' income by 2022. To ensure remunerative price to farmers for their produce, the agriculture mandis are being connected online. So far, agricultural commodities valued at about 36,000 crore have been traded on e-NAM portal," he said.
He noted that as a result of government s policies and the hardwork of farmers, a record production of more than 275 million tonnes of food grain and about 300 million tonnes of horticultural produce have been achieved in the country. "The highest priority of my Government is to remove various difficulties faced by farmers and to raise their standard of living. The schemes of my Government are not only removing their hardships but also reducing the expenditure incurred by them on farming," he said.
The International Monetary Fund (IMF) projects the Indian economy to grow at 7.4 per cent in 2018, which will make it the fastest growing country among emerging economies. The IMF has also projected a growth rate of 7.8 per cent for India in 2019.
The Economic Survey also flagged risks from rising oil prices. "Some of the factors could have dampening effect on GDP growth in the coming year viz. the possibility of an increase in crude oil prices in the international market," the Survey said.
Ten new facts on the Indian economy
1) Large increase in registered indirect and direct taxpayers
2) Formal non-agricultural payroll much greater than believed
3) State's prosperity is positively correlated with their international and inter-state trade
4) India's firm export structure is substantially more egalitarian than in other large countries
5) Clothing incentive package boosted exports of ready-made garments
6) Indian parents continue to have children until they get the desired number of sons
7) Substantial avoidable litigation in tax arena which government action could reduce
8) To re-ignite growth, raising investment is more important than raising saving
9) Direct tax collections by Indian states and local governments are significantly lower than those of their counterparts in other federal countries
10) Extreme weather adversely impacts agricultural yields