Economic Survey | A Huge Challenge For PM Modi

The Economic Survey while pegging the economic growth for India at 6.5% to 7.5% for the coming fiscal, highlighted the fact that the non performing assets (NPAs) for the PSU banks may keep increasing. A team led by chief economic adviser Arvind Subramanian prepared the lengthy document that recommends govement on various macro- and micro- economic indicators.

The survey in its hard hitting analysis questioned using per capita GDP as a key benchmark to upgrade a country's sovereign rating, which will provoke developing countries to say, "Lower middle income countries experienced an average growth of 2.45 percent of GDP per capita (constant 2010 dollars) between 1970 and 2015".

By contrast, the International Monetary Fund slashed its India growth forecast for the current fiscal year by a full point to 6.6 per cent, handing the title of the world's fastest-growing economy back to China, which reported 6.7 per cent growth for 2016. "Some of this weakness could be offset through higher public investment, but that would depend on the stance of fiscal policy next year, which has to balance the short-term requirements of an economy recovering from demonetisation against the medium-term necessity of adhering to fiscal discipline - and the need to be seen as doing so", it said. These include tax reforms and bringing the real estate sector under the planned goods and services tax. "Growth slowed as demonetisation reduced demand. and increased uncertainty", said the survey.

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Based on recent inhouse analysis in 2016, it is estimated that an FTA with the European Union and the United Kingdom can lead to 1,08,029, 23,156, and 14,347 additional direct jobs per annum in the apparel, leather and footwear sectors respectively, said the Survey.

Its annual economic survey concluded that the so-called demonetisation scheme had hit a host of sectors including real estate and farming but also said tax revenues could be boosted in the long-run.

Gross Domestic Product: The GDP projection is likely to be the most talked about topic when the Economic Survey is tabled in Parliament on Tuesday. But it continues to add that this will be an underestimate as the recorded numbers will understate the impact of demonetisation on the informal sector which is heavily cash dependent. The survey reports that the GDP growth rate will only be temporarily affected by the note-ban and that, post remonetisation, the growth rate will bounce back to over 7%.

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The Survey also advocated the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.

"India is well positioned to take advantage of China's deteriorating competitiveness due to lower wage costs in most Indian states", the survey noted. The survey estimates will underpin the government's budget for 2017-18, which Jaitley will present on Wednesday.

What's interesting is that the economic survey has challenged the rating agencies who have upgraded China, while India's credit rating has remained unchanged.

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