Economic Survey: Civil Services Mentor Magazine - May - 2016

Economic Survey

The Economic Survey 2015-16 was tabled in Parliament by the Union Finance Minister Shri Arun Jaitley. Survey expects Indian economy to perform well dispute the gloomy picture of international economic environment. Survey says India stands as a haven of stability and an outpost of opportunity. Survey says Indian economy will doing well because of mainly two reasons; the government’s commitment to fiscal consolidation and low inflation. The Survey also praised reorientation of government spending toward needed public infrastructure. Describing these achievements as remarkable, the Survey emphasizes that the task is now to sustain them in an even more difficult global environment.

The Survey further states that the country’s performance reflects the implementation of number of meaningful reforms. Economic environment in country has been helped by the government’s commitment towards reducing corruption, which is imminent in auctioning the assets. Survey also praised the government’s initiative to liberalise the FDI across the board and vigorous efforts have been undertaken to ease the cost of doing business.
Survey said agriculture being the important section of Indian economy. Government’s initiative of a major crop insurance programme will help this sector. The Survey has highlighted creation of bank accounts for over 200 million people under Pradhan Mantri Jan Dhan Yojana (PMJDY), the world’s largest direct benefit transfer programme in case of LPG with about 151 million beneficiaries receiving Rs. 29,000 crore in their bank accounts has been praised by Suvey. However, the Survey has expressed concern over approval of GST Bill being elusive so far, the disinvestment programme falling short of targets and the next stage of subsidy rationalization being a work-in-progress. It adds that corporate and bank balance sheets remain stressed affecting the prospects for reviving private investments. It further says that perhaps the underlying anxiety is that the Indian economy is not realizing its full potential.

Like previous year Survey again states that the country’s long run potential growth rate is still around 8-10%. For that to achieve government needs to work on three important fields, India being pro-industry must evolve into being genuinely pro-competition. Similarly, skepticism about the state must translate into making it leaner. Secondly, the Survey calls for major investments in health and education of people to exploit India’s demographic dividend to optimal extent. Third, survey says government needs to put major emphasis on the Agriculture. On the education front, the declining educational outcomes reflected in lower reading levels in both public and private sector schools are areas of concern.

According to Annual Status of Education Report (ASER) 2014, there is sharp decline between 2007 to 2014 in the number of children in Standard V who can read a textbook of Standard II, in both government and private schools. Economic Survey 2015-16 states that the Gender Parity Index (2013-14 Provisional) however, shows an improvement in girls’ education, with parity having been achieved between girls and boys at almost all levels of education. The Government has taken several steps to provide education to underprivileged, vulnerable and marginalized people such as SCs, STs, other Backward Classes (OBC) including Minorities and other Economically Backward Classes through various programmes of education. ‘Digital Gender Atlas for Advancing Girl’s Education in India’ was launched last year to help identify low-performing geographic pockets for girls, particularly from marginalized groups.

A number of scholarship schemes to encourage enrolment and learning levels among different groups are in operation. National Scholarship Portal, a single window system for various types of scholarship schemes administered by different Ministries/Departments has been introduced under Direct Benefit Transfer (DBT) mode. During 2015-16, about 90 lakh Minority students are to be benefited under the Pre-matric, Post-matric and Merit-cum-Means scholarship schemes, while about 23.21 lakh SC students benefited under Pre-matric, 56.30 lakh under Post-matric and 3354 under the Rajiv Gandhi National Fellowship including the Top Class Education scholarship scheme are to be assisted.

The Survey accepts that external environment remains unusually challenging and weak, government policy needs to be designed to counter that. Major currency re-adjustment in the wake of Chinese de-valuation is a major risk for India according to survey. Another external risk is capital controls taken to respond to curb outflows from large emerging market countries. The Survey says that in either case, foreign demand is likely to be weak which requires to find and activate domestic sources of demand to prevent the growth momentum from weakening.

In the economic outlook, real GDP growth for 2016-17 is expected to be in the 7% to 7.75% range. However, it cautions that if the world economy remains weak, India’s growth will face considerable headwinds. On the domestic side, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the seventh pay commission is implemented and return of normal monsoon. At the same time, the Survey enumerates three down side risks – turmoil in global economy could worsen the outlook of exports, contrary to expectations oil prices rise would increase the drag from consumption and the most serious risk is combination of the above two factors.

Another challenging are for the Indian economy is the twin balance sheet problem – the impaired financial positions of the Public Sector Banks (PSBs) and some corporate houses. The twin balance sheet challenge is restraining full-fledged economic recovery and it also reduces the private investment in the Indian economy. Survey provides four steps to resolve the problem of twin balance sheet.

  • Recognition;
  • Recapitalization;
  • Resolution and
  • Reform.

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