Budget 2019

India in a sweet spot, says Economic Survey

Shishir Sinha New Delhi | Updated on January 24, 2018 Published on February 27, 2015

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Finance Minister Arun Jaitley with Chief Economic Advisor Arvind Subramanian at a pre-Budget meeting in New Delhi (file photo).

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Finance Minister Arun Jaitley on his way to table the Economic Survey 2014-15 in Parliament on February 27. Photo: Kamal Narang

Copies of Economic Survey 2014-15 papers to be tabled by the Finance Minister at the Lok Sabha being brought into to Parliament House, New Delhi on Feb 27, 2015. Photo: Kamal Narang

Projects over 8% growth for 2015-16 on reforms, low oil prices, normal monsoon

India has reached a sweet spot and could finally be on a double-digit medium-term growth trajectory, says the Economic Survey, projecting over 8 per cent growth in 2015-16.

Decisive policy shifts by the Centre that have stabilised the macro-economic situation, a declining trend in inflation, and a benign external environment make India the cynosure of investors, says the report-card on the economy for 2014-15, tabled in Parliament on Friday.

The Survey, which sets the tone for the Budget, sent the stock market surging, with the Sensex closing 473 points up on expectations of a business friendly initiative by Finance Minister Arun Jaitley tomorrow.

The Survey, authored by Chief Economic Advisor, Arvind Subramanian, listed four factors for higher growth: the cumulative effect of reforms, declining oil prices, monetary easing due to lower inflation and a normal monsoon.

Growth surge

“In the coming year, real GDP growth at market prices is estimated to be 0.6-1.1 percentage points higher vis-a-vis 2014-15,” the Survey said. Using 2014-15 as the base, growth at market prices is expected at 8.1-8.5 per cent in 2015-16, it said.

Subramanian said growth is the pre-requisite for achieving economic and other objectives. Maximising the benefits of growth will require complementary public actions, he said adding that without growth, opportunities will shrink across the income spectrum.

Overall, the Survey said that in the short run, growth will receive a boost from lower oil prices, likely monetary policy easing facilitated by lower inflation, lower inflationary expectations, and the forecast of a normal monsoon this year.

In the medium term, growth prospects will be conditioned by the ‘balance sheet syndrome with Indian characteristics,’ which has the potential to hold back rapid increases in private sector investment.

The Survey observed that there has been a structural shift in the inflationary process due to lower oil prices and deceleration in agri prices and wages. “Going forward inflation is likely to remain in the 5-5.5 per cent range, creating space for easing of monetary conditions,” it said.

The Survey has expressed concern over the alarming rise in the stalling of projects in the last five years.

However, “the good news is that the rate of stalling seems to have plateaued in the last three quarters. The stock of stalled projects has come down to about 7 per cent of GDP at the end of the third quarter of 2014-15 from 8.3 per cent the previous year,” it said

The Survey, which focuses on the broad themes of creating opportunity and reducing vulnerability, suggested India must meet its medium-term fiscal deficit target of 3 per cent of GDP. This will provide the fiscal space to insure against future shocks.

“The nation must also reverse the trajectory of recent years and move towards the golden rule of eliminating the revenue deficit and ensuring that, over the cycle, borrowing is only for capital formation. The way to achieve this objective should be based on firm control over expenditure, most notably by eliminating leakages in subsidies and social expenditures,” it said.

Opposition unimpressed

The Survey, however, hit the political hotspot, with the Congress terming it a “statistical jugglery”, and the Left parties saying that the basic thrust of the Survey is anti-people.

Published on February 27, 2015
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