Economic Survey 2016-17: Highlights

Date: January 31, 2017

GDP Tax Reforms CPI Debt

The Economic Survey 2017 was presented in the Parliament today by the Finance Minister Arun Jaitley.The Economic Survey pointed out that demonetisation will have both short-term costs and long-term benefits.

Key Highlights of Economic Survey


* FY18 GDP growth in the range of 6.75-7.50%
* FY17 industrial growth seen 5.2% vs 7.4% FY16
* FY17 farm growth seen 4.1% vs 1.2% FY16
* Services sector seen growing 8.9% FY17, almost same as FY16
* India macroeconomic indicators remain robust
* India to remain fastest growing major economy in FY18
* Three main downside risks to FY18 GDP growth forecast
* Demonetisation a risk to FY18 GDP growth forecast
* Rise in oil prices a risk to FY18 GDP growth forecast
* Rise in global trade tensions risk to FY18 growth
* Rebound in global demand an upside risk to FY18 growth
* Private invest unlikely to recover significantly FY18
* Outlook for FY18 GST collections must be cautious
* States' average fiscal deficit curbed to 3% of GSDP
* States' average debt-GSDP ratio seen a decline
*CPI-based core inflation stable, average about 5% FY17
* States' average revenue deficit has been eliminated
* Methodology of rating cos not reasonable or consistent
* To release a review on economy later in summer
* India survived major shocks from US polls, cash curbs
* Easy to become complacent about macro economic stability



* Need to seriously consider universal basic income idea
* Universal basic income an idea ripe for discussion
* Universal basic income idea not ripe for implementation
* Universal basic income plan may lessen exclusion error
* Universal basic income rollout to see many challenges
* Universal basic income cost seen at 4-5% of GDP


* Currency shortage to affect supply of some farm products
* FY17 GDP to understate note ban hit on informal sector
* Remonetisation to eliminate cash squeeze by April
* Demonetisation to have short-term costs, long-term gain
* Contractionary effect of note ban to subside by year-end
* Note ban to shave off 25-50 bps from FY17 GDP growth
* Demonetisation led to job losses, fall in farm income
* Remonetisation to see GDP converge to trend path FY18
* Social disruption in cash-intensive areas on note ban
* RBI balance sheet to shrink post note exchange deadline
* RBI wealth to rise when unreturned cash is extinguished
* Anecdotal evidence shows active laundering
* Govt wealth to rise when unreturned cash extinguished
* Govt windfall post note ban must be spent on capex
* Remonetisation should depend on actual demand for cash
* Penalty on cash withdrawals would encourage hoarding
* Must end cash withdrawal caps soon to curb note ban hit
* There should be no penalties on cash withdrawals
* Penalty on cash withdrawal will encourage cash hoarding
* Govt, RBI must bear cost of digitalisation incentives
* This isn't the forum to discuss management of note ban
* Size of short-term costs of note ban remains uncertain
* Size of long-term gains of note ban remains uncertain
* "Digitalisation not a panacea, nor is all cash bad"
* Must balance cost, benefits of cash, digital payments
* Transition to digitalisation must be gradual
* Move to digitalisation must consider digitally-deprived
* Incentive to boost digital payment should be time-bound
* Must ensure interoperability of digital payment systems
* Fall in real estate prices post note ban is desirable


* Need to modify operational framework of FRBM Act
* Basic tenets of FRBM remain valid
* Govt more credible now due to steady fall in fiscal gap
* See fiscal windfall from invalid notes not returned
* See fiscal windfall from PM Garib Kalyan Yojana
* Fiscal windfall from low oil prices to disappear FY18
* Fiscal gains from demonetisation to take time to realise
* Fiscal gains from GST to take time to be realised
* Muted non-tax revenues to weigh on fiscal math FY18
* Govt staff allowances to weigh on fiscal math in FY18
* Economic recovery from demonetisation needs policy support
* Excise related taxes to fall around 0.1% of GDP FY18
* Pay panel award, UDAY bonds a challenge to state fisc
* Fiscal activism of advanced economies not relevant for India
* Income tax rates could be cut to complement note ban
* Can accelerate timetable for cutting corporate tax rate
* Suggest bringing land, real estate under GST
* Property tax can be tapped for more city level revenue
* Fall in stamp duty, tax must to boost affordable homes
* Can cut real estate stamp duties to complement note ban
* Property tax can be tapped for more city level revenue
* Can use satellite technology to up property tax compliance


* Lower interest rates in FY18 to boost economy
* Rise in oil prices may reduce scope for monetary easing
* Market interest rates seen lower in FY18 due to note ban
* Sharp rise in prices FY18 may cap monetary easing room
* Constructs new measure of real effective exchange rate



* Moots asset rehabilitation agency for PSU banks
* Govt-backed bad bank to hasten NPA resolution
* 13 banks with 40% of India loans "severely stressed"
* PSU banks' return on assets way below global norm
* Investors not keen to pay "full price" for PSU bank shares
* Can use RBI's excess capital to recapitalise PSU bad bank
* PSU asset recast co best use of note ban windfall gain
* Must solve twin woes of debt-laden cos, NPA-heavy banks
* Need decisive NPA resolution to avoid drag on growth
* No reason why extra capital should be kept with RBI
* RBI currently "exceptionally highly capitalised"
* Case for redeploying RBI capital more productively
* FCNR redemptions went off smoothly
* Can use RBI excess capital for recapitalising PSU banks
* Can use RBI excess capital to extinguish govt debt
* RBI excess capital use shouldn't hurt its credibility


* Recommend labour, tax reforms for leather sector
* Recommend labour, tax reforms for apparel sector
* China's fall in competitiveness good for leather export
* Spot tariff for electricity below breakeven rate
* Most private power generation cos short on cash
* Balanced fall in realty price must for affordable homes