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”.