India one of the most open economies globally for FDI: Economic Survey

Economic Survey Vol II tabled 'Rekindled optimism on structural reforms'

The Finance Ministry on Friday tabled the second volume of the Economic Survey for the financial year 2016-17, which stated that it will be hard for the government to achieve real gross domestic product growth of 6.75%-7.5% in this financial year. For stressed farm revenues, various farm loan waivers which will lead to fiscal tightening, declining profitability in the power and telecommunications sector further aggravate the twin balance sheet problem.

The fiscal outlook for 2017-18 is still uncertain, it said, while deflationary impulses continue to weigh on the economy.

New Delhi-The Goods and Services Tax (GST) rate of 3 per cent on gold was low and needs to be increased as it is consumed by the "very rich", feels Chief Economic Advisor Arvind Subramanian, the author of the Economic Survey.

The Survey was critical of the state farm loan waivers warning that could touch Rs 2.7 lakh crore.

The survey mentioned that inflation is expected to remain below the RBI's four percent target through to the end of the fiscal year and described scope for monetary easing as "considerable".

Disinflationary pressures allowed the Reserve Bank of India (RBI) last week to cut its main policy rate - the first easing by an Asian central bank this year - by 25 basis points to 6 percent, the lowest since November 2010. The government document said that both inflation and GDP were subdued and there was considerable slack in the economy which was shown in the levels of excess capacity.

Faster monetary easing, the ministry argued, would help deleverage corporate balance sheets and restore banks' profits, helping the economy realize its full potential.

The Survey said that during 2016-17, Railways registered a negative growth of 4.5 percent over previous year. It said that since February 2017, the rupee had appreciated by about 1.5 per cent in real terms, impacting exports.

"The forecast for GDP reflects the greater risks to the downside", Chief Economic Adviser Arvind Subramanian wrote in the report. Another positive outcome was that 5.4 lakh additional taxpayers were added post demonetisation.

The Survey noted that the House rent allowance could push CPI by 40-100 bps where as the loan growth of Private banks would be more robust than that of PSU banks.

The survey also highlighted the increasing competition that India faces from new "digital only entrants" from Eastern Europe and Latin American countries, including newer companies like Globant, EPAM, and Luxoft.

"Telecom sector has experienced "renewables shock" in the form of a new entrant after launching of services by the new entrant in September 2016", it said.

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