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GST, bank recapitalisation & rising exports to boost economy: What the Economic Survey says

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This year’s Economic Survey has predicted higher growth but has also pointed out the challenges facing the economy.

New Delhi: The Economic Survey 2017-18, released Monday, has indicated demonetisation in 2016 helped boost aggregate household savings which found their way to the markets.

The survey, tabled in the Parliament by Finance Minister Arun Jaitley, has raised the GDP forecast to 6.75 per cent from 6.5 per cent.

The survey says the implementation of Goods and Services Tax (GST), liquidation of major stressed companies and the recapitalisation package to strengthen public sector banks, and an export uplift from the global recovery, has helped accelerate economic growth following a period of slowdown.

Key takeaways from the Economic Survey

  • The Indian economy will grow at 6.75 per cent for the rest of 2017-18 as opposed to 6.5 per cent predicted by the advance estimates by CSO. However, the economy is projected to grow at 7-7.5 per cent in 2018-19, making it the fastest growing economy in the world again.
  • There has been a 50 per cent increase in unique indirect tax payers under GST, when compared with the pre-GST system.
  • Though the currency in circulation and the money supply in the economy have grown after demonetisation, bank credit growth remains subdued, especially to the industrial sector.
  • CPI-based headline inflation averaged 3.3 per cent during April-December 2017-18, the lowest in the last six financial years. The significant reduction in food inflation, particularly of pulses and vegetables, moderated the general inflation.
  • The average crude oil prices, which have already risen by 14 per cent in 2017-18, can see a further rise of 10-15 per cent in 2018-19, thus having a significant impact on the GDP of the country.
  • The services sector continued to be a key driver of India’s economic growth contributing almost 72.5 per cent of gross value added growth in 2017-18. The growth of this sector in 2017-18 is expected to be 8.3 per cent, the growth in services exports and net services were robust at 16.2 per cent and 14.6 per cent respectively in the first half of 2017-18.
  • After remaining in negative territory for a couple of years, growth of exports rebounded in 2016-17 and strengthened further in 2017-18.
  • There is an estimated 31 per cent of the non-agricultural workforce working in the formal sector. However, the formal sector, defined in terms of being part of the GST net, suggests a formal sector payroll share of 53 per cent.
  • Climate change could reduce agricultural incomes by up to 25 per cent.
  • There is still a strong desire in the Indian society for a male child, and hence there is skewed sex ratio in favor of males.
  • The survey has prioritised investment revival to boost the growth prospects of the economy. It has praised the government’s plan for resolution of bad debts and recapitalisation of public sector banks.
  • There has been considerable progress in Roads, Railways, Metro Rail, Shipping, Civil Aviation, Power and Logistics Infrastructure Sectors that is expected to step up the growth momentum in the short term.
  • Over the medium term, three areas of policy focus have been pointed out in the survey: Employment – finding good jobs for the young and burgeoning workforce, especially for women, Education – creating an educated and healthy labor force, and Agriculture – raising farm productivity while strengthening agricultural resilience.

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