Finance minister Arun Jaitley will table the Economic Survey 2015-16 in Parliament on Friday.
Here are 10 things to watch out for in the pre-budget survey often described as the government’s official report card on the economy.
The survey will likely forecast that India’s GDP growth for next year (2016-17) will be above 8%. India is set to grow at 7.6% in 2015-16 and remains a “bright spot” amid sputtering global conditions led by a deceleration in China. Last February, the survey had said that the Indian economy had hit a “sweet spot”. What are the prospects over the next 12 months? The survey, drafted by chief economic advisor Arvind Subramanian and his team, will have a few answers.
Last year, the Economic Survey coined JAM (Jan Dhan, Aadhar and Mobile) to describe the Narendra Modi-led government’s policy philosophy aimed at making the development model more inclusive. This year’s survey is also widely expected to use a new term on similar lines.
The NDA-government has been at the receiving at political barbs on its economic policies, with the Congress-led opposition accusing it of favouring large corporations (“suit-boot ki sarkar”) and ignoring the farm economy. The budget for 2016-17, which finance minister Arun Jaitley will present on Monday, will likely propose a major new programme for the rural sector. The Economic Survey could obliquely hint about these plans.
In past years, the Economic Survey has not hesitated to criticise the slow pace of reforms that are critical to push growth in India. Parliamentary standstill is holding up key initiatives including tax and labour reforms. The Economic Survey this year could hold out cues about the government’s annoyance over delayed reforms because of a stubborn Opposition.
The Centre’s plan to roll-out Goods and Services Tax (GST) from April 1, 2016, has run into stiff political opposition. The Congress wants the GST rate to be capped at 18% in the legislation itself and has demanded that the 1% entry tax to compensate the so-called “manufacturing” states be scrapped. The survey could contain the government’s observations on the status of GST’s roll-out plans.
The 7th Pay Commission has submitted its report and if it is accepted, it would result in an additional annual burden on the exchequer. Finance minister Arun Jaitley has recently said that Rs 1.10 lakh crore will have to be set aside in 2016-17 to meet the extra spending on pay commission and one-rank, one-pension (OROP) payouts. The survey will likely contain a few pointers on how it will affect the government’s fiscal plans.
The government has set a fiscal deficit target of 3.9% for the current financial year and 3.5% for 2016-17. It remains to be seen if the government can adhere to the target without reducing expenditure in the wake of the ballooning wage and pension bill.
India’s exports have been declining for 14 straight months due to weak global demand. A weak export market would impact India’s overall growth story. What’s the strategy to turn the sector around that accounts for about 16% of India’s GDP? The Economic Survey could have a few answers.
Record low crude and commodity prices have aided India’s plans to keep the inflation genie firmly bottled up. With demand for energy in China, the world’s factory, falling because of a crippling industrial slide, inflation is expected to remain within manageable limits in 2016-17 as well. The survey will have a projection of what the average retail inflation rates are likely to be over the next 12 months.
India’s banks have been beset with mounting bad loans. The non-performing assets (NPA) or loans that have turned bad have crossed Rs 4.3 lakh crore during the quarter-ended December. Almost all banks have seen their profits drop sharply. It could get worse in the current quarter with banks forced to set aside or “provision” a greater amount to account for these advances that have stopped yielding earnings. Besides, public sector banks are in dire need of more funds to meet the new capital adequacy norms under the global Basel III norms. Analysts will keenly watch the Economic Survey’s remarks to deal with India’s mount of bad loans.