Economic Survey 2016-17 Volume-2

Economic Survey generally comes in two volumes. But this year due to the paucity of time and some major ongoing economic developments like demonetization, GST bill etc. the second volume was delayed and only the first volume was released in January. Now when Economic Survey 2016-17 Volume-2  is released, let us check out some of its key highlights.

Fiscal Developments:

• Real economy grew by 7.1 per cent in 2016-17 compared with 8 percent the previous year.
• Fiscal Deficit was contained within 3.5% of GDP (2016-17). Thanks to strong growth in tax revenue and consolidation of non-salary/pension revenue expenditure.

Target   –    3.2% of GDP in 2017-18

3.0% of GDP in 2018-19

• The integration of the Railway Budget with the Union Budget.
• Elimination of the classification of expenditure into ‘plan’ and ‘non-plan’
• The introduction of the Goods and Services Tax (GST) with effect from the 1^stday of July 2017.
• Trade deficit narrowed down to 5.0 percent of GDP in FY 2016-17 as compared to 6.2 per cent in the previous year.

Monetary Management and Financial Intermediation:

• As of August 2017 Repo rate is at 6.00 per cent and reverse repo rate at 5.75 per cent.
• Due to demonetization, as of 31st March 2017, currency in circulation contracted by 19.7% whereas reserve money contracted by 12.9 %.
• Due to Sluggish growth and increasing indebtedness in some sectors of the economy, gross non-performing advances (GNPAs) ratio of Scheduled Commercial Banks (SCBs) rose from 9.2 per cent in September 2016 to 9.5 per cent in March 2017.

Prices and Inflation:

• There was a significant moderation in CPI headline inflation and CPI inflation fell to a low of 1.5 percent in June 2017. (As food inflation declined significantly due to normal monsoon).
• CPI and WPI inflation have started converging (WPI showing an upward trend due to recovering crude oil prices).
• The gap between rural and urban inflation has narrowed down.

Climate Change, Sustainable Development and Energy:

• India ratified the Paris Agreement on 2nd October 2016. India’s actions for the post-2020 period will be based on its Intended Nationally Determined Contribution (INDC).
• India is implementing the largest renewable energy expansion programme in the world. It envisages an overall renewable energy capacity of 175 GW by 2022. This includes 100 GW of solar, 60 GW of the wind, 10 GW of biomass, and 5 GW of small hydro power capacity.
• Many schemes like Pradhan Mantri Ujjwala Yojana, PAHAL scheme, Deen Dayal Upadhyaya Gram Jyoti Yojana are being implemented by the government to ensure a pathway to lower emission and climate resilient development.
• To promote clean energy, Securities and Exchange Board of India (SEBI) has, on May 2017, put in place the framework for the issuance of green bonds.

External Sector:

• The current account deficit (CAD) narrowed down to 0.7 percent of GDP in 2016-17 from 1.1 percent of GDP the previous year.
• India’s balance of payment (BOP) further improved in 2016-17, as a result of low& falling trade and CAD and moderate and rising capital inflows, resulting in further accretion of foreign exchange reserves (Forex).
• India’s trade deficit narrowed down to US$ 112.4 billion (5 per cent of GDP) in 2016-17 as compared to US$ 130.1 billion (6.2 per cent of GDP) in 2015-16.
• Net capital inflows were slightly lower at US$ 36.8 billion (1.6 per cent of GDP) in 2016-17 as compared to US$ 40.1 billion (1.9 per cent of GDP) in the previous year, mainly due to fall in NRI deposits.
• Among the major economies running CAD, India is the second largest forex holder after Brazil with reserves at US$ 386.4 billion as on 7th July 2017.
• In 2017-18 (April-June) there was double digit export growth at 10.6 per cent with export growth continuing to be in positive territory continuously for the last eleven months.
• The rupee performed better than many other (Emerging Market Economy) EME-currencies in 2016-17.
• The ratio of external debt to GDP ratio fell to 20.2 per cent from 23.5 per cent, while forex provided a cover of 78.4 per cent to external debt compared to 74.3 per cent in the previous year.
• Gross FDI inflows to India increased significantly to US$ 60.2 billion in 2016-17 from US$ 55.6 billion in 2015-16.

Agriculture and Food Management:

• The predominance of small farm size in India is a major limitation in reaping the benefits of economies of scale in agriculture operations.
• The progress in agriculture needs to be evaluated in terms of outcomes such as catching up with global yields of various crops as a means to increase incomes of farmers.
• Formal sources of credit for farmers need to be improved and regional disparity in the distribution of agricultural credit also needs to be addressed.
• The key challenges that the horticulture sector faces in India are post-harvest losses, availability of quality planting material and lack of market access for the horticultural produce of small farmers.

Industry and Infrastructure:

• Industrial performance declined to 5.6 percent in 2016-17 from 8.8 percent during 2015-16.
• Industrial growth as per Index of Industrial Production (IIP) new series of 2011-12 shows overall IIP growth at 5 percent in 2016-17 as compared to 3.4 percent last year.
• The Index of Eight Core Industries growth during 2016-17 was 4.8 percent as compared to 3.0 percent in 2015-16.

Services Sector:

• The services sector continues to be the key driver of India’s economic growth, contributing almost 62 per cent of its gross value added growth in 2016-17. However, the growth of this sector has moderated to 7.7 per cent in 2016-17 compared to 9.7 per cent achieved in the previous year.
• India’s services sector growth, which was highly resilient even during the global financial crisis, has been showing moderation in recent times.

Social Infrastructure, Employment and Human Development:

• The Government’s Swachh Bharat Mission has had remarkable progress since its inception. With its focus on cleanliness and Open Defecation Free (ODF) India, there has been a significant decline in the number of people who defecate in the open, which is estimated at less than 35 crores.

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