#EconomicSurvey: Govt's Report Card Portrays Economy As 'Haven Of Stability'

Finance Minister Arun Jaitley tabled the Economic Survey 2015-16 — the summary of the economic performance of the nation in the previous fiscal — in Parliament on Friday. The minister portrayed an optimistic picture of the Indian economy stating that amid the gloomy landscape of unusual volatility in the international economic environment, India stood as a haven of stability and an outpost of opportunity. The survey termed the India's macro economy stable, founded on the government's commitment to fiscal consolidation and low inflation. The survey has been penned by chief economic advisor Arvind Subramanian and his team in the North Block.

PropGuide lists some of the key takeaways from the survey, often described as the government's official report card on the state of the economy.

The macro picture

India registered 7.2 per cent growth in 2014-15 and 7.6 per cent in 2015-16, thus, becoming the fastest growing major economy in the world. The survey forecasts India's economy would grow between 7 per cent and 7.75 per cent in the coming fiscal.

The survey says that fiscal deficit should come down to 3.5 per cent of the GDP in 2016-17, from 3.9 per cent in the current financial year. The survey predicted that the government's target for the current financial year of 3.9 per cent fiscal deficit was achievable. The survey also stated that the increase in wages and benefits recommended by the Seventh Pay Commission were not likely to destabilise prices and will have a little impact on inflation.

The growth in industry is estimated to have accelerated during the current year on the strength of improving manufacturing activity. The private corporate sector, with around 69 per cent share of the manufacturing sector, is estimated to grow by 9.9 per cent at current prices in April-December 2015-16.

Foreign exchange reserves have risen to US$ 349.6 billion by January 2016.

The caveat

The survey states that perhaps the underlying anxiety was that the Indian economy was not realising its full potential and a few of the glitches were:

One of the most critical short-term challenges facing the economy is the twin balance sheet problem – the impaired financial positions of the public sector banks (PSBs) and some corporate houses.

If the world economy remains weak, India's growth will face considerable headwinds.

The survey enumerates three downside risks – turmoil in the global economy could worsen the outlook of exports, contrary to expectations oil prices rise would increase the drag from consumption and the most serious risk is the combination of the above two factors. 

The survey has expressed concern over the approval of GST Bill being elusive so far, the disinvestment programme falling short of targets and the next stage of subsidy rationalisation being a work-in-progress.

What's in store?

The survey stated that the country's long-term potential growth rate was around 8-10 per cent. To realise this potential, a push on at least three fronts was required.

India has moved away from being reflexivity anti-markets and uncritically pro-state to being pro-entrepreneurship and skeptical about the state. But being a pro-industry, it must evolve into being genuinely pro-competition. Similarly, skepticism about the state must translate into making it leaner. It emphasises that the key to creating a more captive environment will be to address the exit problem which affects the Indian economy.

The survey calls for major investments in health care and education in order to exploit India's demographic dividend to an optimal extent.

It says that India cannot afford to neglect its agriculture.