Key highlights of Economic Survey 2016-17
Dr. Krishna Ram
Economic
Survey is an annual document published by the Ministry of Finance which
is presented by the finance minister before the parliament a day before
the presentation of Union Budget. This year the finance minister Mr.
Arun Jaitely presented the Economic Survey 2016-17 before parliament on
31.1.2017. The Economic Survey highlights the overall economic scenario
of past financial years as well as outlines the future prospect of the
economy in the short to medium term. Here are the some of the highlights
of the economic survey 2016-17:
The
economic survey 2016-17 begins by mentioning eight interesting and
important facts about India apart from mentioning the two most important
developments that took place in the year 2016. One of the two most
important developments is implementation of long awaited and
transformational Goods and Service Tax (GST). And the second is
demonetization of Rs. 500 and Rs. 1000 currency notes. The survey
reiterates the economic and social benefits of demonetization and GST.
The survey argued that demonetization has a transitory short term cost
but has very high potential to generate long term benefits in terms of
reduced corruption, greater digitization of the economy, increased
savings and greater formalization of Indian economy, all of which would
eventually lead to higher GDP growth, better tax compliance and better
tax revenues. GST creates a common Indian market, improve tax
compliance, boosts investment and growth. Apart from these two, The
survey mentions about several other programmes such as, Jan Dhan
-Aadhaar Mobile (JAM), The National Payment Corporation of India (NPCI),
Unified Payments Interface(UPI) and many more which can bring India in
the forefront of global economy. India is one among the world's fastest
growing economy, underpinned by stable macro economy with declining
inflation and external balances.
Considering
Indian economy performance measured in term of GDP, as per the first
advance estimates released by CSO, the Indian economy is expected to
grow at a rate of 7.1 percent in year 2016-17. The survey predicted a
lower estimate of a range of 6.75 -7.5 percent of GDP growth for the
upcoming financial year 2017-18.
In
year 2014-15 India witnessed real GDP growth of 7.2 percent which had
gone up to 7.6 percent in year 2015-16. The main reason for decline in
growth rate attributed to decline in fixed investment which has declined
sharply from 3.9 percent in 2015-16 to (-) 0.2 percent in 2016-17.
Considering
the sectorial composition of growth rate of Gross Value Added (GVA) at
constant basic price we can see that primary (Agriculture & Allied
) sector grown at rate of 4.1 percent in year 2016-17 which was
significantly higher as compared to the year 2015-16 mainly because of
normal monsoon in current year as compared to pervious year which was
preceded sub-par monsoon.
However,
there was a decline in growth rate of secondary (Industry) sector which
declined from 7.4 percent in year 2015-16 to 5.2 percent in year
2016-17.
Tertiary
(Service) sector projected to grow at 8.8 percent in year 2016-17 which
is 0.1 percent point lower as compared to the year 2015-16. The fall in
growth rate of service sector is mainly because of slowdown in global
output and trade.
CPI
- Inflation, remained under control and below the RBI target of 5
percent in last two successive financial years and this trend is likely
to continue in the next financial year too. In year 2014-15, average CPI
inflation was 5.9 percent which has declined to 4.9 percent in year
2015-16 and to 4.8 percent during April - December 2016. There is
reversal in decline of WPI inflation from (-) 5.1 percent in August 2015
to 3.4 percent at end of December 2016 partly because of rise in
international crude oil prices and partly owing to adverse base
effect. Although, overall CPI inflation declined in year 2016 from the
previous year of 2015, core inflation (exclusive of food and fuel
group) remained constant so far this fiscal year.
In
external sector, due to slow rate of growth in world's trade and
output, India registered decline in export by 1.3 percent in year
2014-15 and 15.5 percent in year 2015-16. The trend of negative growth
reversed during April -December 2016, with export registering a growth
rate of 0.7 percent compared to corresponding period of 2015-16. USA
followed by UAE and Hong Kong are the India's top export destinations.
On import side, the value of imports declined too. The value of
imports declined from US $ 448 billion in the year 2014-15 to US $ 381
billion in 2015-16, mainly because of decline of crude oil prices
resulting in lower level of Petroleum, Oil & Lubricants (POL)
imports. Net service receipts declined too in the first half of year
2016. Net private remittances declined by $ 4.5 billion during the same
period. Overall, India's current account position was good in the year
2016-17. India's current account deficit has been secularly declining
since 2013-14. In the 2013-14 current account deficit was 1.7 percent of
GDP which declined to 1.1 percent in 2015-16. It has further narrowed
to 0.3 percent of first half of 2016-17 as compared to 1.5 percent in
corresponding period of 2015-16.
The
fiscal front statistics show that government is in a much better
position compared to earlier years. Fiscal deficit of Centre declined to
3.5 percent of GDP in 2016-17 which is the lowest figure that India has
achieved since 2013-14. This has reaffirmed Government's commitment to
maintain fiscal deficit figures around 3 percent. The consolidated
fiscal deficit of states has kept growing securely in recent years. The
consolidated deficit of states has risen from 2.5 percent of GDP in year
2013-14 to 3.6 percent of GDP in 2015-16.
India
is a nation of young people and these young people need to be healthy,
suitably educated and appropriately skilled so that they can contribute
optimally in building of the nation. Therefore, for the reason, public
expenditure on these sectors becomes very crucial. If we look at the
expenditure on social services which includes expenditure on health,
education and other social services we find that total combined
expenditure on these services both by Centre and States as proportion of
GDP was 7 percent in 2016-17 which is 0.1 percent higher than
expenditure of previous year 2015-16. Out of the total expenditure,
education and heath expenditure account for 2.9 percent and 1.4 percent
in 2016-17 respectively. The percentage share of education to GDP
remained constant between 2015-16 and 2016-17. However, share of health
has increased from 1.3 percent in 2015-16 to 1.4 percent in 2016-17.
For
education sector, the survey emphasizes that although there is
improvement in access to education and retention of students in the
school, the learning outcome of majority of children is still a cause of
serious concern. Some of the reasons identified in the survey that
cause low quality of education at primary and secondary level of
education are teacher absenteeism and the shortage of professional
qualified teachers. The survey states that though the share of teacher
component in the total Sarva Shiksha Abhiyan (SSA) budget has been
almost doubled from 35 percent to 50 percent between 2011-12 &
2014-15, teacher absenteeism and shortage remain an issue to be
addressed.
In
the health outcome section, the survey reveals that there is
considerable decline in infant mortality and crude death rate. Total
Fertility Rate (TFR) was 2.3 (rural 2.5, and urban 1.8) during 2014.
Infant Mortality Rate (IMR) has declined to 37 percent per 1000 live
birth in 2015 from 44 percent per 1000 live birth in 2011. However,
there is a huge gap in IMR between rural (41 per 1000 live birth) and
urban (25 per 1000 live births) areas which is a matter of concern for
the policymaker. The Maternal Mortality Ratio (MMR) has declined to 167
maternal deaths per 1000 live births in 2011-13 from 301 maternal deaths
per 1000 live births during 2001-03. There is wide inter-state
disparities in MMR. The states like Assam (300 per 1000 live births),
Uttar Pradesh (285), Rajasthan (244) , Odisha (222), Madhya Pradesh
(221) and Bihar (208) recorded higher MMR well above the all India MMR
rate of 167 per 1000 live births. Apart from these, it is also evident
that that there is high level of anaemia prevalent among woman in age
group of 15-49 years which have a direct correlation with MMR. In
Haryana and West Bengal more than 60 percent of Woman suffer from
anaemia. Under the National Health Mission (NHM) government has a
special programme to address the problem of anaemia among woman.
The
latest employment and unemployment survey (EUS), 2015-16 estimated
labour force participation rate (LFPR) at all India level based on usual
principal status approach was 50.3 percent. Comparing LFPR between male
and female and across states we find that LFPR of female (23.7 %) is
much lower than that of male (75.0 %) with a wide inter-state variation.
The North-Eastern & Southern states in general have higher female
LFPR as compared to Northern states. Survey report also shows that
unemployment among female is much higher than male in both rural and
urban areas. Considering employment by sector and category there is
clear shift of employment from primary sector to secondary and tertiary
sector between the period 2011-12 and 2015-16. However, growth in
employment by categories reflects increase in casual and contract
worker. This indicate preference of employers away from regular or
formal employment probably because of unfavourable labour laws. The
multiplicity of labour laws and difficulty in their compliance have been
identified as impediment to the industrial development and employment
generation.
The
survey has mooted the concept of Universal Basic Income (UBI) as an
alternative to various social welfare progamme in an effort to reduce
poverty. The survey detailed the benefits and cost of UBI. Based on the
six top welfare programme- the PMAY, SSA, MDM,PMGSY, MGNREGA and SBM the
survey pointed out that the district which are poor and in greatest
need are precisely the one which receive lower share of government
resources as compared to richer districts. The Survey points out that
the misallocation of resources results in exclusion of deserving poor
and needy from access to government welfare programme benefit , enhance
leakages, and increased corruption. The survey argued that UBI is less
likely to be prone to exclusion errors as it reduces the burden of
administration by doing away the tedious and often complex task of
identifying who is poor and who is not. And also it will reduce
out-of-system leakages by transferring money directly to bank account of
beneficiaries.
The
survey emphasizes that the successful implementation of UBI requires
effective financial inclusion in which existing JAM (Jan Dhan, Aadhar
and Mobile) programme would play a very important role. Second, there
should be some cost -sharing arrangement between Centre and State for
the programme.
Apart
from the UBI, the survey suggests to set up of a centralized Public
Sector Assets Rehabilitation Agency to address the problem of Twin
Balance Sheet (TBS)/overleveraged companies and bad loan encumbered
banks which is dragging the growth of Indian economy.
(The author is Assistant Professor at Shivaji College, University of Delhi, New Delhi. e-mail : mrkrishnaram@gmail.com. Views expressed are personal.)
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