Says Rates of 8 Per Cent or Higher Expected in the next couple of years as there is Macro-Economic Stability now

Economic Survey 2015-16 : with reforms in key areas, there is reduction in Macro-Vulnerability today

Indian economy has taken impressive strides with reduction in macro-vulnerability due to reforms in key areas, pursuit of fiscal prudence and focus on price stability. The Economic Survey 2015-16 presented in the Parliament today by the Finance Minister Shri Arun Jaitley states that the benign price situation and comfortable level of external current account in the country makes it possible now for growth rates of 8 % or higher in the next couple of years.

It says as the Government is committed to carrying the reform process forward and conditions exists today for such growth aided by the prevailing macro-economic stability.

The Report portends growth rate in the range of 7 to 7.5 per cent in 2016-17.   After 7.2 per cent in 2014-15 and 7.6 per cent in 2015-16, such growth rate of over 7 per cent makes India the fastest growing major economy in the world.  It states that India’s contribution in the global economy has become much more valuable today as China is rebalancing.   The Survey further mentions that the recent growth revival in India is predominantly consumption driven.  It says while the growth in services sector has moderated slightly. The acceleration in manufacturing growth has compensated for the lower growth in agriculture sector, due to two successive years of lower than normal monsoon rains.

The Survey, however, expresses a caution of weak global demand.

Post Fourteenth Finance Commission (FFC) recommendations, equilibrium is sought to be achieved between higher capital expenditure, higher net resource transfers to States and higher gross tax revenues, the Economic Survey 2015-16 states.  

It says that in spite of challenges and lowers than projected GDP growth during 2015-16, the fiscal deficit target of 3.9 per cent of GDP seems achievable. This became possible as the Gross Tax Revenue (GTR) targets were achieved, due to improved tax buoyancy and prudent expenditure management, assisted by declining oil prices.

The Survey points out that an indication of better fiscal management is that the total expenditure for 2015-16 was estimated at ₹ 17.77 lakh crore which was 5.7 per cent higher than the revised estimates of 2014-15. A growth of 25.5 per cent was envisaged in capital expenditure, reiterating the focus on quality of expenditure. The notable highlights of the benign fiscal outcome in the current year till December 2015 included: robust growth in indirect taxes, increased tax devolution to the states in line with the recommendations of the FFC, the highest increase in capital expenditure in the last six years and decline in major subsidies.

The Economic Survey 2015-16 further points-out that the wholesale price inflation had been in the negative territory for more than a year and the consumer price inflation has also declined to about half of what it used to be in earlier years. It says the astute policies and management of inflation by the government through buffer stocking, timely release of cereals and import of pulses had helped in keeping prices of essential commodities under check during 2015-16.

The Survey however indicates that the  recurrence and rebound in the prices of some essential food items, as experienced in the second half of the year, indicates that we would require continued deft supply management in the near future.

It points out that with easing of inflation measures, the RBI had brought down the repo rate by 125 basic points (bps) from the beginning of 2015 to 6.75 per cent by the end of September 2015.   It says that the RBI also further conducted various measures like variable repo rate and reverse repo (overnight and term) auctions to address the day-to-day liquidity requirements.  The operating target of monetary policy thus remained closely aligned to the policy repo rate the Economic Survey 2015-16 asserts.

The Economic Survey points-out that there is urgent need to rationalize agricultural policies including subsidies by making them ‘input-crop and region-neutral’ to improve productivity in agriculture. It says the adoption of Quality/GM/Pest resistant seeds will be another pathway to improve the productivity in agriculture. The concerns around GM seeds need to be resolved through debate and tests. The Direct Benefit Transfer (DBT) mode for inputs like seeds and fertilizer can prevent leakage and diversions in the system and reach the targeted beneficiaries, the Survey says.

The Survey indicates that there was a good performance on the front of Government’s initiatives towards achieving the overall goal of Financial Inclusion through Pradhan Mantri Jandhan Yojana(PMJDY), Pradhan Mantri Suraksha  Bima Yojana(PMSBY), Pradhan Mantri  Jeevan Jyoti Bima Yojana(PMJJBY), the Atal Pension Yojana(APY) and setting- up of Micro Units Development Refinance Agency (MUDRA) in the banking and insurance sectors.  The Survey also points-out as to how measures were taken to mobilize gold for productive purposes, through the Sovereign Gold Bond Scheme and the Gold Monetization Scheme.

It, however, stated that the performance of the Scheduled Commercial Banks remained subdued during 2015 and there had been sluggish growth of bank credit. 

The Survey, however, expects continued good performance by the Industrial, Corporate and Infrastructure Sectors in the wake of various recent reform measures undertaken by the Government.  It says development of the Infrastructure Sector has been a priority area for the Government and it witnessed enhanced public investment.  Growth in the freight carriage by Indian Railways, at Ports, the growth in the Civil Aviation Sector, Telecommunication Sector and National Highways Construction have all been impressive.

Some reform measures which contributed to such growth include: Auctions successfully undertaken for allocation of coal and mines blocks.

Improvements in Policy  for production sharing contracts under NELP and testing requirements along with  a Uniform Licensing and Open Acreage Policy etc., in the petroleum sector has been taken up.

Tax-free infrastructure bonds have been allowed for rail, roads and irrigation programmes

National Investment and Infrastructure Fund (NIIF) to extend equity support to infrastructure Non-Bank Financial Companies (NBFC).

More open FDI policy has been adopted with FDI allowed for Defence sector up to 49%; Railways 100%; Insurance and Pension 49% etc. Apart from this, a number of sectors like construction, broadcasting, civil aviation, plantation, trading, private sector banking, satellite establishment and operation and credit information companies etc. have been liberalized.

It points out that the Services Sector continues to be the key driver of India’s economic growth and it accelerated to 10.3 per cent in 2014-15 from 7.8 per cent in the previous year and it is expected to be 9.2 per cent (constant prices) in 2015-16 as per the advanced estimates. This is due to lower growth in Public Administration, Defence and other Services.  There has been a rising trend in FDI equity inflows to the services sector in the first seven months of 2015-16 with FDI inflows growing by 74.7 per cent.  The Report, however, points out that there has been sluggishness in India’s service exports in the recent months due to global slowdown. 

The Survey points-out that at the end-September 2015, India’s external debt has remained in safe limits as shown by long term debt accounted for 82.2 per cent of India’s total external debt, vis-à-vis 82.0 per cent at end-March 2015. The proportion of short term debt to total external debt decreased from 18.0 per cent at end-March 2015 to 17.8 per cent at end-September 2015. External debt to GDP ratio of 23.7 per cent and debt service ratio of 7.5 per cent in 2014-15 are at comfortable levels, it adds.

On the front of Social Infrastructure, Employment and Human Development, the report points at the preponderance of unskilled workers in India. The Economic Survey 2015-16,   states that the Government is committed to invest in bridging the skill gap.  It also talks of technology for Efficient Delivery of Services.  The Report points out those more than 122 lakh toilets have been constructed in rural areas since the beginning of Swachh Bharat Mission (Gramin) for improving sanitation situation in rural India.

The Economic Survey 2015-16 points-out the need to focus on the quality of education in both the public and private sectors. There is need for professionally qualified and trained teachers to improve educational outcomes. To strengthen the delivery of public health services and infrastructure facilities, both public investments and leveraging of private investments are necessary. To improve the efficiency in the delivery of services and to overcome the shortages in the skilled personnel in health sector policy interventions are felt needed.

On the Climate Change and Sustainable Development front, Survey states that India had been an active participant and a signatory to the United Nations Framework Convention on Climate Change (UNFCCC) Agreement signed in December 2015 and to the Sustainable Development Goals (SDGs) agreement signed in September 2015.

India stated its Intended Nationally Determined Contribution (INDC) goals for the renewable energy sector, mainly from solar and wind energy.  The aim is to achieve a target of 60 GW of wind power as well as 100 GWs of solar power to be in the country installed by 2022, the Survey adds.