As per Economic Survey 2016-17 Volume II, tabled in Parliament by Finance Minister Arun Jaitley on August 11, 2017, meeting the upper end of the 6.75-7.5 per cent GDP growth forecast for 2017-18 will be a challenge.
Highlights of Economic Survey 2016-17 Volume II:
- Stressed farm revenues, farm loan waivers and a series of deflationary impulses have been outlined as reasons for anxiety in the economy.
- In context of farm loan waivers, the report mentioned that they could reduce aggregate demand by as much as 0.7 per cent of GDP, imparting a significant deflationary shock to the economy.
- The Economic Survey also highlighted the fact that there has been significant moderation in Consumer Price Index (CPI) headline inflation during the last three years and that the current inflation is running well below the 4 percent target, suggesting that inflation by March 2018 is likely to be below the RBI’s medium term target of 4 per cent.
- On brighter side, factors such as launch of the Goods and Services Tax (GST), positive impacts of demonetisation, in-principle decision to privatize Air India along with further rationalisation of energy subsidies and actions to address the Twin Balance Sheet (TBS) challenge contribute to optimism in the economy.
- In particular, GST is expected to reduce prices because of the lower incidence of taxation compared to the combined incidence of central and state taxes previously.
- Moreover, the fiscal deficit target of 3 per cent of Gross Domestic Product (GDP) under the Fiscal Responsibility and Budget Management (FRBM) framework is projected to be achieved in 2018-19.
- The report added that, there exists an upside potential to revenues both from the compliance benefits of the GST and the compliance possibilities opened up by demonetisation.