On 26th February 2016, the union finance minister presented the economic survey for the year 2016-17, which is a key economic survey as presented by the government. The economic survey of India of the year 2016-17 expects the country to show a GDP Growth of 7 to 7.5%. According to the estimates of the central statistics office, the growth as expected this year is 7.65, which was earlier 8.1 to 8.5% as projected in the last survey.
The economic survey which was tabled way back in the start of the month, highlighted several path breaking recommendations. The highlights were raising resources for the complete re capitalizing process of public sector banks with the help of better leverage of various assets of RBI and several regulatory institutions.
As mentioned above, the growth rate of the Indian economy has been estimated to be around 7 to 7.5% in the year 2016-17. The medium term growth rate has been projected at the same rate, with the emphases been laid at the achieving of the growth rate of 8% only possible after two years in case the economic reforms will continue.
As per the fiscal point of view; the year 2016-17 is expected to be a challenging one and can be considered as the perfect time for a review of framework in medium term fiscal.
When we talk of the inflation, the expected inflation seems to be around 4.5 to 5% in the year 2016 to 2017. Low inflation and confidence in the price stability has taken a forefront for the upcoming year. It is being expected that the reserve bank of India will meet 5% inflation target by the month of March, the next year. Another expectation as per Economic survey 2016-17 indicates the inflationary expectations will be dampened all because of prospects of lower oil prices over the medium term.
Current Account Deficit
Current Account Deficit (CAD) is a measurement of the country’s trade, with the consideration of a country’s value of goods and services being higher than the value of services and goods being exported. The year 2016-17 will see the current account deficit to be around 1-1.5% of GDP.
The currency strengthening can be achieved over the time and can be done through the means of monetary relaxation. In an effort to the currency strengthening process, the country needs to adopt some measures towards the currency readjustment which can be on the same model as that of China. As per reports of the economic survey 2016-17, it is recommended that the depreciation of rupee can be allowed in case capital inflows are on a weaker side.
Banking and Corporate Sector
When we talk about the banking and corporate sector, it is being estimated that the banks capital requirements will touch a margin of around 1.8 trillion INR within 2 years. The economic survey 2017 also has laid a proposal to the availability of around 700 billion rupees through budgetary allocations to banks in upcoming years.
A recommendation of the Economic survey 2016-17 also suggests the government to sell off all non financial companies so that the capital can be gained for the purpose of infusing it to state run banks.
The reviving of the private investments can be done through the better management of the corporate and bank balance sheets which right now is a stretched one.
All stressed assets must be sold out which are currently present in corporate sector.
Projected at the lower growth rate, initially, things can see a change because of recent monsoon conditions in India, which saw a turn around. Initially, the economic survey 2016-17 projected a lower than the average growth rate in the agriculture sector in comparison to the last decade. The things in the sectors like livestock, forestry and fisheries will see an expected growth of around 5% in upcoming years, thus providing an overall rural happiness.
The service sector will not show any significant change and is expected to remain at the same condition. The services sector, which is considered to be the main part in the economy, has extended its share of the economy to around 53% from 49%.
The economic survey 2016-17 has stated that rationalization and reprioritization of subsidies will help in the fiscal consolidation and thus will target more expenditure in inclusive development.
The economic sector suggests that the growth in this part of the industry has shown acceleration all because of the improvement in the manufacturing process. The growth rate has been noticed at around 3.1% and is expected to continue with the same pace. The sectors like water supply, gas and electricity and other such related sectors, are in fact showing a declining status and are in a slump. While the sectors like petroleum refining, automobiles, wood products and other such sectors have shown a great improvement and major development and growth rates.
The tax revenue will be on a higher side in the upcoming year. The GST will also play a very important role in the tax revenue and will be playing a key role in the next year’s change on a national level. The recommendation as mentioned in the economic survey 2016-17 favors a reviewing and phasing out tax exemptions. The tax base needs to be widen enough in order not to raise tax exemption thresholds.
The economic survey has also suggested that GST will be a major reform in the country, which will be launched on a country basis from 1st April, 2017. The economic survey also highlighted India as op placed in the world in the milk production, thus accounting for around 18.5% of the total production in the entire world.
The economic survey 2016-17 suggests that India is a haven for the stability during the phase where the entire world is facing gloomy economic conditions.