Economy
Economic Survey sees no pick-up in growth, pushes reforms
New Delhi : India's Economic Survey sees the growth rate for the coming fiscal to remain at 7-7.75 percent due to domestic factors and warns that the upcoming budget will have to contend with an unusually challenging and weak external environment.
 
The survey, tabled in parliament by Finance Minister Arun Jaitley here on Friday, also expresses concern over pan-India GST being elusive, the divestment programme falling short of target and recast of the distortive subsidy regime, especially for fertilisers, being a work-in-progress.
 
This apart, the survey says, balance sheets of Indian banks remain stressed, becoming a roadblock to the revival of private investments, adding to the anxiety that the country's growth potential of 8-10 percent in the long term.
 
"This year's survey comes against the backdrop of an unusually volatile external environment with significant risks of weaker global activity and non-trivial risks of extreme events," says the survey, authored by Chief Economic Advisor Arvind Subramanian.
 
"Fortifying the Indian economy against possible spill-over is consequently one obvious necessity. Another necessity is recalibration of expectations," it says, and warns that if the world lurches into a crisis or slides further into weakness, India's growth, too, will be severely affected.
 
On the positive side, though, the survey says India will remain the fastest-growing large economy and a refuge of stability with an outpost of opportunity, even as steps taken toward a stable tax tax system, ease of doing business and foreign participation have gone down well globally.
 
It also projects the retail inflation to ease further to 4.5-5 percent in 2016-17.
 
Coming as it does on the eve of the national budget for the next fiscal, and given its import in providing the direction the country's economic policy should take in the coming year, the survey also spells out its policy prescriptions, both broad and specific.
 
Among them, it wants as good an exit policy for industry, notably start-ups, as entry norms as it will remove impediments to investments, job creation and growth. It also wants focus ro return towards agriculture and human needs like health and education to reap the demographic dividend.
 
"While dynamic sectors such as services such as services and manufacturing tend to grab public attention, India cannot afford to neglect its agriculture. After all, nearly 42 percent of Indian households derive bulk of their income from farming."
 
On fiscal deficit, it says the target of 3.9 percent of GDP, which Jaitley set for this fiscal, was achievable. But it also says the coming year will be a challenging one, calling for improving tax compliance, tapping new revenue sources, re-look expenditure and recast subsidies.
 
It wants the income tax net to widen from 5.5 percent of earning individuals to 20 percent.
 
Notwithstanding the volatality and turmoil, the survey says the Indian equity markets have been relatively resiliant compared to peers in other major emerging market economies, and potentially sees the country as the leading investment destination due to its robust economic fundamentals.
 
The survey also feels there is lot to be done so that policy-making is quick with public servants being able to decide without fear or favour. As of now, it says, the legal provisions are seen as draconian, and anti-corruption laws scaring the honest without deterring the corrupt. 
 
"There is a widely held perception both within the civil service and among outsiders who interact with government, that civil servants have in recent times become increasingly reluctant to decide issues quickly and firmly. This has consequences for the economy."
 
On social aspects, the survey makes some worrisome observations and calls for corrective action. It says India still has the second highest number of undernourished people, warranting immediate action. Over 42 percent of its pregnant women are underweight.
 
"Despite recent progress, India generally under-performs on maternal and child-health indicators, it says, adding: "India is already half-way through its demographic dividend and taking the full advantage requires a healthy and educated population."
 
Subramanian also outlines what has been the theme and focus of this year's survey, given that the Indian economy is "richly complicated". He says the focus is to outline policies that will enable Indians to lead a better, richer and healthier life. On the whole, he remains an optimist.
 
"In sum, for now, but not indefinitely, the sweet spot for India is still beckoningly there."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Trade deficit declines, FTAs increase exports, imports: Economic Survey
New Delhi : India's trade deficit declined to $106.8 billion between April 2015 and January 2016 compared with $119.6 billion in the corresponding period of 2014-15, the 2015-16 Economic Survey said on Friday.
 
Forecasting a strong economic outlook for the country, the survey said the Current Account Deficit (CAD) was limited to 1.4 percent of the GDP from April to September 2015 while foreign exchange reserves stood at 351.4 billion dollars as of February 5, 2016.
 
"During the current financial year (April-January), the growth in India's exports declined year-on-year by 17.6 percent and stood at 217.7 billion dollars. The imports also declined by 15.5 percent during the period to 324.5 billion dollars," said the survey that was tabled in parliament on Friday by Finance Minister Arun Jaitley.
 
Fall in Petroleum Oil Lubricants imports resulted in decline of imports in the current fiscal.
 
"While exports slowdown may continue for a while before picking up in the next fiscal, continuation of low commodity prices globally augurs well for sustaining low trade and CAD," said the survey.
 
The survey forecast that CAD as a portion of GDP is likely to be in the low range of 1-1.5 percent.
 
Lower CAD of 26.8 billion dollars (1.3 percent of GDP) in 2014-15 and 14.4 billion dollars (1.4 percent) in H1 2015-16 has been attributed to moderate growth in invisible surplus along with lower trade deficit.
 
According to the survey, India's Balance of Payments (BoP) position remained comfortable in H1 2015-16.
 
Shedding light on the rise in foreign exchange reserves, the survey said low CAD levels coupled with moderate rise in capital inflows contributed to the spike of 10.6 billion dollars in H1 2015-16.
 
"India's foreign exchange reserves at 351.5 billion dollars as of February 5, 2016, mainly comprised foreign currency assets equal to 328.4 billion dollars (93.4 percent of the total) and gold at 17.7 billion dollars, the survey added.
 
Foreign exchange reserves increase improved the external sector vulnerability indicators and reserves cover for the imports rose from 8.9 months to 9.8 months from March 2015 to September 2015.
 
India's external debt to GDP ratio is within safe limits at 23.7 percent, said the survey.
 
Commenting on India's Free Trade Agreements (FTAs), the Economic Survey said FTAs have led to increased imports and exports.
 
"Since the mid-2000s, India's FTAs have doubled to about 42 today. They have increased trade with FTA countries more than would have happened otherwise," said the survey.
 
However, trade on imports side is higher than exports side as India maintains relatively high tariffs and had larger tariff reductions compared to its FTA partners.
 
Trade flow on both sides (imports and exports) benefitted healthily in case of Association of Southeast Asian Nations (Asean) FTAs, exports rose by 33 percent and imports by 79 percent.
 
"The trade increases have been much greater with the Asean than other FTAs and they have been greater in certain industries, such as metals on the import side. On the export side, FTAs have led to increased dynamism in apparels, especially in Asean markets," the survey said.
 
Interestingly, 10 percent reduction in FTA tariffs on metals and machinery increased their imports by 1.4 percent and 2.1 percent respectively, compared with others.
 
"In the current contest of slowing demand and excess capacity with threats of circumvention of trade rules, progress on FTAs, if pursued, must be combined with strengthening India's ability to respond with World Trade Organisation-consistent measures such as anti-dumping and conventional duties and safeguard measures," said the survey.
 
Analytical and other preparatory work must begin in earnest to prepare India for a mega-regional world, the Economic Survey added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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GST to bring dramatic changes in tax system: Survey
New Delhi : As a reform measure, the Goods and Services Tax (GST) would result in dramatic changes in the Indian tax system, the Economic Survey 2015-16 said on Friday.
 
"GST rollout will be a major reform measure in the global tax history as it is estimated to affect 2-2.5 million excise and service tax payers across the country when implemented," said the survey, presented in the Lok Sabha by Finance Minister Arun Jaitley.
 
The tax requires a constitution amendment bill, which has been passed by the Lok Sabha last year but awaits approval of the Rajya Sabha where it is stuck as the government does not have a majority.
 
The GST will also check speculation in real estate with higher property tax rates, it said.
 
The survey proposed widening the tax net to 20 percent from 5.5 percent of earning individuals, reasonable taxation of the better-off and income from real estate and agriculture, annd phasing out of the tax exemption raj.
 
It also called for widening the individual tax payers' base as 85 percent of the economy remains outside the tax net despite the number of tax returns filed picking up since mid-1980s.
 
As a step towards building fiscal capacity, the survey suggested that the easiest way to widen the tax base would be not to raise exemption thresholds, unlike in the past when they were raised much more rapidly than underlying income growth.
 
Calling for a review and phasing out of the tax exemption raj that benefited the richer private sector, the survey recalled the promise of reducing corporate taxes to 25 percent from 30 percent and phasing out of exemptions, reasonable taxation of the better-off individuals in industry, services, real estate or agriculture.
 
It identified higher property tax rates with periodic updation to improve local government finances, discourage speculation in real estate sector and pave way for smart cities.
 
Another alternative to fiscal consolidation will be to reduce subsidies to the well-off amounting to Rs.1 lakh crore by better targeting subsides to the poor. 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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