Economic Survey Vol II tabled: 'Rekindled optimism on structural reforms'

Andrew Cummings
August 11, 2017

Chief Economic Advisor Arvind Subramanian who is the force behind the Survey, while trying to project a realist picture through the the Survey said deflationary challenges like lower farm revenues, decline in non-cereal food prices, farm loan waivers, fiscal pruning, and declining profitability in the power and telecommunication sectors - can be hard to overcome.

"These include: stressed farm revenues, as non-cereal food prices have declined, farm loan waivers and the fiscal tightening they will entail and declining profitability in the power and telecommunication sectors, further exacerbating the twin-balance sheet (TBS) problem", the survey said.

DK Srivastava, Chief Policy Advisor, EY India, said: "The mid-term review's admission of a growth slowdown from the pre-budget Economic Survey projection of an average growth exceeding 7 percent is candid and realistic".

Expenditure on education has grown from 2.8 per cent in 2014-15 to 3.2 per cent of the GDP in FY17, while health sector saw it going up up from 1.2 per cent in 2014-15 to 1.5 per cent in the last fiscal, Economic Survey said.

Considerable scope for monetary policy easing; Repo Rate 25-75 basis points above neutral rate.

Moneycontrol said, "The second volume, which will be presented as a standalone document in Parliament containing large data sets on a range of macroeconomic metrics updated till March 2017, will also likely articulate the benefits of goods and services tax (GST) that kicked-in from July 1, giving an insight into its impact on prices and businesses that will play out over months in an economy characterised by multiple pain points".

According to the Survey, CPI inflation declined to 4.5 per cent during 2016-17, with a broad-based price decline in all major commodity groups. Farm loan waivers could cut economic demand up to 0.7% of GDP and likely to give deflationary shock to the economy.

It said the government and the RBI have taken "prominent steps" to address the twin balance sheet challenge which has boosted market confidence in the short run.

There are early signs of tax base expanding post the implementation of GST, it said.

Also, it added that the removal of checkposts and easing of transport constraints after GST implementation can provide some short-term fillip to economic activity.

The Survey wanted stock limits and movement curbs on farm goods to end and credit off-take from banks to pick up.

Private banks' loan growth more robust than of PSU banks.

Citing the example of the United States, it said the "Buy American, Hire American" Presidential executive order called for the collection of data, increased oversight and enforcement actions, and the development of administration plans to reform and curtail the high skill visa programmes.

Labour market impacted by rigid laws and emergence of contract labour.

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