Economic Survey: No backing for any big fiscal push

Changing tack from previous year, the Economic Survey released on Tuesday took a conservative stance on the government's finances, saying that India's economic experience shows the validity of the existing fiscal responsibility framework.

If is now more than clear that GDP growth rate will not cross 8 per cent when Finance Minsiter Arun Jaitley presents his fifth and final budget next year. This, in turn will allow growth to converge to the trends rates and move GDP growth to the 6.75% to 7.5% range in 2017-18. Judging how quickly the economy will recover has been a tough call for economists. It suggests that for long term benefit, real estate should be brought under GST so that tax revenues from this sector increases. While on one hand, demonetisation has led to reduced cash flow, on the other, it has increased supply of deposits.

NPAs: As per the Survey, gross NPAs has climbed to nearly 12 per cent of gross advances for public sector banks at end-September 2016.

However, the survey said that as the economy is remonetised and conditions normalise, the uncertainty should dissipate and spending might well rebind toward the end of the fiscal year.

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The survey said government pay rises and muted tax receipts could put pressure on the fiscal deficit in the coming fiscal year. The Survey also attributed the decline in CPI inflation to codification of institutional arrangements on monetary policy.

Throwing light on economy, Subramanian said, "It's fair to say there have been short-term costs to demonetisation that were significant, especially in the informal sector".

Advance estimates released by the Central Statistics Office earlier this month had placed the growth rate at 7.1%, against 7.6% in the year ended March 2016.

The Economic Survey tabled on Tuesday has prescribed the establishment of a centralised public sector Asset Rehabilitation Agency or (PARA) to address the issue of rising non-performing assets (NPAs) in the banking sector. "In December 2010, S&P raised China's rating from A+ to AA and it has never adjusted it since, even as the credit boom has unfolded and growth has experienced a secular decline", the survey pointed.

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The government must continue with incentives for digital payments if it wants to realise its dream of a cash-lite economy, the Economic Survey 2016-17 has recommended. The formalisation should reduce the flow of unaccounted income, which, in turn would cause a reduction in private sector wealth, since some high denomination notes were not returned and real estate prices fell.

"Despite moderation in India's exports, India's external sector position has been comfortable, with the current account deficit progressively contracting", said the survey.

The document has also flagged the Universal Basic Income (UBI) scheme as "a conceptually appealing idea" that could work as an alternative to the various social welfare programmes that are targeted at reducing poverty.

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