Click here for Highlights of Economic Survey - Volume II
Why in news?
The second volume of the Economic Survey for 2016-17 was recently released.
What is its significance?
- First volume was released just before the Union Budget which had been advanced by a month.
- This means that the section of the Survey that dealt with the data for the past financial year could not be produced at the same time.
- This data is now been published in volume II.
- It also carries an analysis of the economy since the Budget.
- It is direct about the struggles that the Indian economy faces and lays out an urgent case for a traditional reform programme.
What are its findings?
- Growth - Volume I had forecast growth in GDP, of between 6.75% and 7.50% in 2017-18. Volume II has not changed that range but acknowledged that the downside risks have increased.
- Falling agricultural revenue, state government finances, stress in the power and telecommunications sectors, and the costs of transitioning to the GST regime are mentioned as some of these risks.
- GST - It points out that other than the GST, there is no real grounds for medium- or long-term optimism.
- It also acknowledges that the current form of GST is incomplete.
- Inflation - It believes that India has moved permanently to a lower-inflation paradigm because of the permanently lower oil prices now, since 2014 and the transformation of agricultural sector that made agricultural prices less volatile.
- But it does not effectively prove the argument that agriculture has been reformed sufficiently.
- There is also no persuasive evidence that high inflation could not return.
- Interest - It argues that current real interest rates of 4.7% are too high.
- Factors of growth - It attributes India’s recent growth spurt to the exceptional circumstances like slow credit growth, stagnant or declining exports, and weak investment.
- The growth is driven entirely by government spending and consumption.
- These circumstances are not sustainable and hence it warrants action on “more normal drivers of growth”.
Source: Business Standard
