Carrying on the reform momentum, leaner role of the state and enhanced focus on agriculture can take India’s growth to 8% or higher in the next couple of years, says the Economic Survey released by Finance Minister Arun Jaitley on Friday. At a time when the newest normal for the world economy is one of turbulence and volatility, “India (with its robust macro-fundamentals) is a refuge of stability and an outpost of opportunity,” states the Survey.
India became the fastest growing major economy in the world by growing at 7.6% in 2015-16. The services sector remains the key driver of India’s economic growth contributing almost 66.1% to it. The Survey, however, projects a sluggish rate of growth next year with the expected growth rate in the range of 7 to 7.5%.
Given the global and domestic challenges to growth, the survey espouses more government spending to catalyse private sector investment in the country. It calls for a pragmatic fiscal consolidation path because the need of the hour is to generate economic momentum in the economy. Such spending on creating infrastructure in the country should be seen positively by the RBI’s governor who, the Survey feels, has plenty of room to cut interest rates.
The payout on account of the seventh pay commission is not likely to increase the inflation in the economy with retail inflation (CPI) expected to remain between 4.5 to 5% in 2016-17 which is well within the comfort level of the RBI.
Major highlights of the Survey include some bold suggestions which may well become a reality in the future.
The Survey suggests imposing tax on agricultural incomes, rationalisation of fertiliser subsidies and argues for not raising tax exemption limits. It focuses on the need for a rural push and appreciates public investments in agricultural sector. It also calls for increasing the women participation in India’s labour force.
Concerns about non-passage of game changing legislation like the GST, under-achievement of disinvestment target and stressed balance sheet of public sector banks as well as of big corporate were also highlighted in the Survey.