New Delhi: None of the D-day predictions of huge slide in economic growth, rampant joblessness and stubborn inflation have come true. According to the Economic Survey for 2017-18, India remains the second fastest growing economy in the world and will again regain its stature as the fastest growing next fiscal.
The survey has accordingly pegged the country’s growth at 6.75 per cent in the current fiscal and 7 to 7.5 per cent for 2018-19, while cautioning that increase in crude oil prices in international market may dampen the spirit. Rising oil prices not only put a burden on the exchequer but can immediately stoke inflation and put obstacles in the path of achieving the fiscal deficit target. The second warning is about an overheated stock market, since India has seen sudden and substantial reallocation of wealth from gold and real estate. People are increasingly parking their wealth in the market and it could crash, suddenly, stressing not just the individual investors but the entire country’s economy.
The government has also warned that climate change could pare back annual agricultural incomes in India by 15 percent to 25 percent with unirrigated lands being harder hit by rising temperatures and declines in rainfall. Already farm incomes have fallen because of the rising cost of production while crop prices have not risen.
The Survey says headline inflation measured by the Consumer Price Index has remained under control for the fourth successive year which “has been possible due to good agricultural production coupled with regular price monitoring by the government”.The Chief Economic Advisor is of the view that if the Insolvency and Bankruptcy Code process progresses well and expeditiously — and if actions happen on time and are accepted without glitches — then there is a chance of private investment
picking up “after so many years of languishing”.The survey notes rather cheerfully that there was an increase in the number of taxpayers, post-demonetisation.”The level of tax filers by November 2017 was 31 per cent greater… This translates roughly into about 1.8 million additional tax payers due to demonetisation-cum-GST, representing 3 per cent of the existing taxpayers. The survey says the outlook for 2018-19 will be determined by economic policy in the run-up the next national election. “If macro-economic stability is kept under control, the ongoing reforms are stabilised, and the world economy remains buoyant as is the case today, growth could start recovering towards its medium term economic potential of at least 8 per cent.”
The survey notes that implementation of a major recapitalisation package to strengthen the public sector banks, further liberalisation of foreign direct investment and the export uplift from the global recovery had played a major role in boosting the growth.The Survey numbers boosted the Indian equity indices — Sensex and Nifty — which touched record highs on Monday.
AREAS OF CONCERN
Economic management will be challenging in the coming year Cyclical conditions may lead to lower tax and non-tax revenues in 2017/18.
Target for fiscal consolida-tion, especially in a pre-election year, carries a high risk of credibility Pause in general govt fiscal consolidation cannot be ruled out .
Persistently high oil prices remain a key risk, to affect inflation, current account, fiscal position and growth If inflation doesn’t deviate from current levels policy rates can be expected to remain stable.
Climate change could trim agricultural incomes in India by 15 percent to 25 percent with unirrigated lands being harder hit by rising temperatures and declines in rainfall.