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Economic Survey for Financial Year 2017-18

Economic Survey for Financial Year 2017-18

th February 2018, the annual Economic Survey of India was presented in the Parliament by Finance Minister Arun Jaitley. The Department of Economic Affairs was prepared under the guidance of the Chief Economic Advisor of the Ministry of Finance, Arvind Subramanian. The economic survey is a compilation of the developments undergone by the economy in the last one year. It also highlights the performance of key policy initiatives and forecasts prospects for the economy. The Economic Survey 2017-18 was prepared in color “pink” to highlight gender issues and emphasize the need for gender equality and empowerment. [caption id="attachment_12499" align="aligncenter" width="640"]Economic Survey for Financial Year 2017-18 Economic Survey for Financial Year 2017-18[/caption]

Gross Domestic Product or GDP in Economic Survey:

  • The Gross Domestic Product (GDP) growth is estimated to clock 6.57% growth in 2017-18. It is projected to rise to 7-7.5% in 2018-19.
  • The high growth is projected due to the structural reforms. They are the Goods and Services Tax and Bankruptcy code and Recapitalization of banks to solve the “Twin Balance Sheet” problem.
  • The two things that could dampen these growth prospects are the rising oil prices and if the elevated stock prices fall. India should focus on sustainable growth engines- private investment and growth

Fiscal Deficit in Indian Economy:

  • The government is projected to reach a fiscal deficit of 3.2% of GDP in 2017-18.

Current Inflation Rate in Indian Economy:

  • The headline inflation based upon Consumer Price Index (Combined) declined to 3.3% between April-December 2017. It was 4.8% in the same period in 2016.
  • Wholesale Price Index (WPI) inflation between April-December 2017 was recorded at 2.9% up from 1.7% in 2016-17.
  • Consumer Food Price Index saw a sharp decline from 5.1% to 1.2% between April-December in 2016-17 and 2017-18.

Savings and Investment in Indian Economy:

  • The savings and investment rate declined despite recorded economic growth.
  • Between 2011-12 and 2015-16, investment or Gross Capital Formation declined by 5%.
  • The Savings Rate declined by 2.5% between 2012-13 and 2014-15.

FDI, Exports and Current Account Deficit in Economy:

  • Exports increased by 12.1% between April –December 2017-18 while imports grew by 21.8%.
  • The Current Account Deficit recorded upward movement from 0.4% of GDP in the first half of 2016-17 to 1.8% of GDP in the first half of 2017-18. It was due to higher Trade Deficit brought about by an increase in oil prices and gold imports.
  • Foreign Exchange Reserves grew to US$ 409.4 billion on December 29, 2017, growing 14.1% since December 2016.
  • Foreign Direct Investment declined by 6.3% between the first half of 2016-17 and 2017-18. But overall Net Foreign Investment grew by 17.4% due to 78% increase in Foreign Portfolio Investment between that period.

Key Sectors Growth of Indian Economy in Economic Survey

  1. Agriculture GrowthEconomic Survey for Financial Year 2017-18
  • The agriculture and allied sector are projected to grow at 2.1 % which slowed down from 4.9% in 2016-17.
  • A structural change in agriculture has been underway with a reduction in Gross Value Added (GVA) through crops. There is a subsequent increase in GVA through livestock in agriculture.
  • Farm incomes loss due to climate change is projected at about 15%-18% in irrigated and 20%-15% in unirrigated areas.
  • Feminization of farm sector due to the migration of men from rural to urban areas is high.
  1. Industry Growth:
  • The industrial sector is projected to grow at 4.4% in 2017-18 decelerating from 5.6% in 2016-17.
  • The new series of Index of Industrial Production (IIP) with the base year 2011-2012, witnessed a growth of 3.2 % between April-November 2017.
  • The eight core industries account for 40% weighting in the IIP- Coal, Crude Oil, Natural Gas, Petroleum Refinery Products, Fertilizers, Steel, Cement, and Between April- November 2017, these core industries witnessed a growth of 3.8%
  1. Service Sector Growth:
  • The service sector continued to grow projecting a growth of 8.3% in 2017-18, up from 7.7% in 2016-17.
  • The services export growth for India was 9.9% according to WTO data for first half of 2017. India was the eight largest service exporter in the world in 2016. Its share in world service export is 3.4%, double the 1.7% contribution of India in world merchandise trade.

Goods and Services Tax Growth in Indian Economy

[caption id="attachment_12500" align="aligncenter" width="640"]Economic Survey for Financial Year 2017-18 Economic Survey for Financial Year 2017-18[/caption]
  • There were total 9.8 million GST registrants out of which 6.4 million are old, and4 million are new registrants.
  • The survey states that there has been a surge of 50% in indirect tax-payers.
  • Formal economy is recognized in two ways – social security for employees or firms under the tax Formal employment according to the first criterion is 31 % and 54% according to the second, much higher than earlier thought.
  • Also, GST has enabled voluntary compliance where 1.7 million register for GST even though their annual turnover is below the threshold limit of Rs. 20 lakh.
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  • 6 million or 17 % of total GST payers filed under the Composition Scheme. Also, 1.9 million or 24% of total firms filed under regular GST to avail Input Tax Credit. They are eligible for composition scheme as well.
  • For the first time in India’s history, data on “International Export of States” was released. It reflects a positive link between the standard of living in states and their export performance. Five states account for 70% of Indian exports- Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana (in the same order).
  • India’s internal trade accounts for 60% of its GDP.

Other Important Points of Economic Survey:

  • There is an increase of 1.8 million individual income tax filers since November 2016 accounting for 3 % of existing taxpayers.
  • Export incentives boost export as the clothing incentive package boosted export of readymade garments.
  • A great number of tax litigations can be avoided as for 66 % cases the value at stake is merely 1.8 percent. Moreover, the success rate of the tax department is very low losing 65% of its cases.
  • From the 55 crore people defecating in the open in October 2014, it has more than halved to 25 crores in January 2018. Moreover, eight states and two Union Territories have been declared Open Defecation Free- Sikkim, Himachal Pradesh, Uttarakhand, Chattisgarh, Arunachal Pradesh, Haryana, Gujarat, Kerela, Daman and Diu and Chandigarh.
  • In a first, the survey contains a chapter on Science and Technology suggesting a boost to Research and Development in Mission Mode.
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