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Economic Survey – Volume II

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August 14, 2017

Click here for Highlights of Economic Survey - Volume II

Why in news?

The second volume of the Economic Survey for 2016-17 was recently released.

What is its significance?

  • First volume was released just before the Union Budget which had been advanced by a month.
  • This means that the section of the Survey that dealt with the data for the past financial year could not be produced at the same time.
  • This data is now been published in volume II.
  • It also carries an analysis of the economy since the Budget.
  • It is direct about the struggles that the Indian economy faces and lays out an urgent case for a traditional reform programme.

What are its findings?

  • Growth - Volume I had forecast growth in GDP, of between 6.75% and 7.50% in 2017-18. Volume II has not changed that range but acknowledged that the downside risks have increased.
  • Falling agricultural revenue, state government finances, stress in the power and telecommunications sectors, and the costs of transitioning to the GST regime are mentioned as some of these risks.
  • GST - It points out that other than the GST, there is no real grounds for medium- or long-term optimism.
  • It also acknowledges that the current form of GST is incomplete.
  • Inflation - It believes that India has moved permanently to a lower-inflation paradigm because of the permanently lower oil prices now, since 2014 and the transformation of agricultural sector that made agricultural prices less volatile.
  • But it does not effectively prove the argument that agriculture has been reformed sufficiently.
  • There is also no persuasive evidence that high inflation could not return.
  • Interest - It argues that current real interest rates of 4.7% are too high.
  • Factors of growth - It attributes India’s recent growth spurt to the exceptional circumstances like slow credit growth, stagnant or declining exports, and weak investment.
  • The growth is driven entirely by government spending and consumption.
  • These circumstances are not sustainable and hence it warrants action on “more normal drivers of growth”.

 

Source: Business Standard

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