ECONOMICSURVEYOFINDIA

2015-16

TheEconomicSurvey2015-16,tabledtodayintheParliamentbyUnionFinanceMinisterShriArunJaitley,highlightstheturbulentexternalenvironmentagainstwhichithasbeenpresented.Therearesignificant risks of weaker global acKvity,markets faltering and extreme events rising. Yet as theSurveystates,“Indiaisarefugeofstabilityandanoutpostofopportunity”.TheIndianeconomyhasseenareducKoninmacro-vulnerabilityandhasmovedtowardsnotablegrowth.Itislikelytobethefastestgrowingmajoreconomyintheworldin2016owingtoreformsinkeyareas,pursuitoffiscalprudenceandfocusonpricestability.Thereportpegsgrowthrateintherangeof7to7.5percentin2016-17.WithcontrolledinflaKonandcomfortablelevelofexternalcurrentaccountinthecountry,itislikelythatgrowthratesof8percentorhighermaybeachievableinthenextcoupleofyears.

Consideringthatglobalgrowthaveraged3.1percentin2015,withadvancedeconomiesimprovingmodestlysince2013andtheemergingeconomies’consistentlydecliningtrendingrowthratesince2010,theIndiangrowthstoryappearsparKcularlybright.India’scontribuKonintheglobaleconomyhasbecomemuchmorevaluabletodaywithChina’srebalancingeconomy.TheSurveysaysthatthegrowthrevivalinIndiaacouldbeascribedtoitspredominantlyconsumpKondriveneconomy.

TheSurveysaysthatalthoughagricultureislikelytoregisterlowgrowthforthesecondyearinarowonaccountofweakmonsoons,ithasperformedbeXerthanlastyear.Industryhasshownsignificantimprovementprimarilyonaccountof theacceleraKon inmanufacturing (9.5per centvis-à-vis5.5percentin2014-15).Meanwhile,thegrowthinservicessectorhasmoderatedslightly.

On the fiscal front, the economy appears to be registering three successes: ongoing fiscalconsolidaKon, improved indirect tax collecKon efficiency, and an improvement in the quality ofspendingatalllevelsofgovernment.ThereportfurtherstatesthatdespitechallengesanddeclineinnominalGDPgrowthrelaKveto theBudgetassumpKon(11.5percent inBudget2015-16vis-à-vis8.6 per cent in the Advance EsKmates), the central government is likely tomeet its fiscal deficittargetof3.9percentofGDP.

Formostof thefiscal year2015-16, inflaKon remainedmoderatehoveringwithin theRBI’s targetrange of 4-6 per cent. The Survey suggests that the substanKal decline in crude oil prices partlycontributedtothedeclineingeneralinflaKonforthesecondsuccessiveyear.FoodinflaKonintermsoftheConsumerFoodPriceIndex(CFPI)declinedto4.8percentduringApril2015-January2016ascomparedto6.4percentinFY2014-15.WholesalePriceIndex(WPI)inflaKondeclinedfollowingtheglobal trend of declining commodity and producers’ prices. TheWPI inflaKon in fuel and powergroupdeclinedsignificantlyandwas(-)12.3percent in2015-16(April-January)downfrom(-)0.9percentinFY2014-15.

EconomicSurvey2015-16:Indianeconomytostandresilientamidstglobalturbulence

1.1%agriculturalgrowth

9.5%Manufacturinggrowth

10.3%financialservices&realestategrowth

US$349.6bnForexreservesgrewby2%from2014-15

US$17.2bnGoldreservesdecreasedby11%from2014-15

3.9%Fiscaldeficitdownfrom4%in2014-15

1.4%CADagainst1.3%inthepreviousyear

Key achievements of the government in implementing reforms, as per the Economic Survey2016-2017

Liberalisationofforeigndirectinvestment(FDI),includingthelong-awaitedinsurancebillIncreasedfocusoneasingthecostofdoingbusinesstowardsmakingIndiamorecompetitiveoninternationalrankingsSupportingtheexpansionofthestartupande-commercesectorRestorationofstabilityandpredictability intaxdecisions,especiallywithrespecttoMinimumAlternateTax(MAT)imposedonforeigncompaniesImplementation of major public investment programs in infrastructure, in lieu of deficientprivateinvestmentInstitutingamajorcropinsuranceprogramtocushionfarmersagainstadversityLimitingfarminterventionsthathadafirst-ordereffectinmoderatingoverallinflationElevationoffinancialinclusionagendato,“Mission,”statusviaJanDhanYojanaAdvancementof the JanDhanAadhaarMobile (JAM)agenda, andestablishing infrastructureforscalability

GDPgrowthprojectedat7-7.5%for2016-17

CPI

WPI

1.2%Netexportagainstdownfrom2.9%ofGDPin2014-15

US$16.6bnNetFDIinH1FY15-16againstUS$16.2bninHY1FY14-15

Keytradedrivers• Petrolimportsreducedby42%between2014-15

and2015-16• Fertiliserimportsincreasedby24%• Cerealsandoilmealsdrove20%reductionin

India'sagricultureexports• Crudeandpetrolexportsreducedby53%

6%

2%

-2.8%

9.5%

5.9%4.9%

The Survey champions the idea of start-ups and removing barriers to the entry of firms, talent, andtechnology intothe Indianeconomy.WhilehighlighKngtheeaseofdoingbusiness, theSurveypointsoutIndia’s‘exitproblem’.TheSurveysays,barriersintheexitoffailedventures“hassubstanKalfiscal,economic,andpoliKcalcosts”.Thisissuepervadesnotjustthepublicsectorandmanufacturingbuttheprivate sector and agriculture. The Survey suggests five soluKons to facilitate exit which includesgovernment’s iniKaKves like the new bankruptcy law, rehabilitaKon of stalled projects, proposedchangestothePrevenKonofCorrupKonActaswellasthebroaderJAMagenda.These,itsuggests,willprovideasignificantboosttolong-termefficiencyandgrowth.

The survey cauKons that the Indian economy must be forKfied against possible spillovers of theinternaKonalvolaKlityandthegovernmentshouldrecalibrateexpectaKons.Italsohighlightstheneedfor Goods and Services Tax (GST) as a reformsmeasure, which, according to esKmates, will affectbetween2to2.5millionexciseandservicetaxpayers.TheSurveyalsoproposeswideningthetaxnetfrom5.5percentofearningindividualstomorethan20percentbyreasonabletaxaKonofthebeXer-offindividualswithincomefromreal-estateandagriculture,andphasingoutofthetaxexempKonRaj.

In the social sector, theSurvey suggests that InvesKng inmaternalhealth couldbecomea toppolicypriority of the government. According to the survey, making investments in maternal nutriKon andsanitaKon and changing social norms to enhance their effecKveness can help exploit India’sdemographicdividend.

CurrencyExchangeRate(INR/US$)

2013-14 2014-15 2015-16

60.51

61.14

65.03

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