Economic Survey sees no pick-up in growth, pushes reforms

New Delhi, Feb 26: 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 exterl environment.

The survey, tabled in parliament by Fince 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 exterl 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 tiol 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 dymic 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 resilient compared to peers in other major emerging market economies, and potentially sees the country as the leading investment destition 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 pregnt women are underweight.

"Despite recent progress, India generally under-performs on materl 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 eble 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."

Highlights
*     Eight percent growth in next couple of years
*    Indian economy stands out as a haven of macroeconomic stability, resilience and optimism and can be expected to register GDP growth that could be in the range of 7.0 percent to 7.75 percent in the coming year
*    Despite difficult global environment, India likely to be fastest growing major economy in the world in 2016
*    Economy will continue to weather global sluggishness with resilience; outlook of multilateral institutions positive for India
* Fiscal deficit target of 3.9 percent for 2015-16 seems achievable
* Coming year expected to be a challenging one from fiscal point of view
* Current Account Deficit (CAD) limits at 1.4 percent of GDP during April-September 2015-16
* GST rollout to mark an unprecedented reforms measure in the modern global tax history
* Indian equity market relatively resilient compared to other major emerging market economies
* Fincial inclusion proceeding at pace under PMJD Yoja
* Several initiatives taken would help transforming infrastructure sector
* FTAs leading to increased imports and exports
* Trade deficit declines to $106.8 billion in April-January 2015-16 from $119.6 billion in corresponding period of 2014-15
* Foreign exchange reserves at $351.5 billion as on February 5, 2016
* Services Sector remains key driver of economic growth, contributing almost 66.1 percent in 2015-16
* FDI equity inflows in the services sector grew by 74.7 percent to $14.8 billion in the first seven months of 2015-16
* 2015 was a landmark Year for India in climate change initiatives
* India ranks first in milk production, accounting for 18.5 percent of world production
* India recording growth of 6.26 percent whereas world milk production increases by 3.1 percent
* Per capita availability of milk in India increased from 176 grams per day in 1990-91 to 322 grams per day by 2014-15
* Egg and fish production has also registered an increasing trend over the years
* Production of fish during the last quarter of 2015-16 shown an increasing trend and is estimated at 4.79 MT
* Impressive strides made in the power sector in the last two years: addition of record generation capacity, moves towards one market in power, reform of discoms and development of renewable energy
* Time ripe for industries to absorb excess generation capacity through "open access" to energize Make in India
* A progressive tariff structure can reduce costs for the poor without unduly burdening the rich
* Agriculture sector needs a transformation to ensure sustaible livelihoods for the farmers and for food security
* Disbursal of subsidy on fertilizers should shift to DBT
* Fixed amount of subsidy in the case of P and K fertilizer subsidy
* Need for shift to demand-driven agricultural advisory services
* Percentage share of horticulture output in agriculture is more than 33 percent
* Over the last decade, area under horticulture grew by about 2.7 percent per annum and annual production increased by seven percent
* Production of horticulture crops has Outpaced production of foodgrain since 2012-13
* For food security in the current agriculture scerio, India has to focus on supplies which are timely, uninterrupted and affordable for the poor
* 57 percent of households had calorie intake below 2,160 KCal/consumer unit/day
* Average protein intake per capita per day rises steadily
* India has the second highest number of undernourished people, warranting immediate attention