Economic Survey Expects Flat GDP Growth in FY17, Inflation To Dip
Government expects economy to grow 7-7.75 per cent in the fiscal year to March 2017, a key government report said on Friday, ahead of the presentation of the annual budget by Finance Minister Arun Jaitley on Monday.
The Economic Survey, the basis for Jaitley's budget for the fiscal year starting April 1, projected India to grow 8 per cent in the next couple of years.
The survey was prepared by the finance ministry's chief economic adviser Arvind Subramanian.
Following are the highlights of the report:
FISCAL DEFICIT
-2015/16 fiscal deficit seen at 3.9 per cent of GDP seems achievable
-2016/17 expected to be challenging from fiscal point of view
-Credibility and optimality argue for adhering to 3.5 percent of GDP fiscal deficit target
-Time is right for a review of medium-term fiscal framework
INFLATION
-Consumer price inflation seen around 4.5 to 5 per cent in 2016/17
-Low inflation has taken hold, confidence in price stability has improved
-Expect RBI to meet 5 per cent inflation target by March 2017
-Prospect of lower oil prices over medium term likely to dampen inflationary expectations
-Low inflation has taken hold, confidence in price stability has improved
CURRENT ACCOUNT DEFICIT
-2016/17 current account deficit seen around 1-1.5 per cent of GDP
CURRENCY
-Rupee's value must be fair, avoiding strengthening; fair value can be achieved through monetary relaxation
-India needs to prepare itself for a major currency readjustment in Asia in wake of a similar adjustment in China
-Gradual depreciation in rupee can be allowed if capital inflows are weak
TAXES
-Proposes widening tax net from 5.5 per cent of earning individuals to more than 20 per cent
-Tax revenue expected to be higher than budgeted levels in FY15/16
- Easiest way to widen the tax base would be not to raise exemption thresholds
- Favours review and phasing out of tax exemptions
BANKING & CORPORATE SECTOR
- Estimated capital requirement for banks likely around Rs 1.8 lakh crore by 2018/19
- Corporate, bank balance sheets remain stretched, affecting prospects for reviving private investments
- Underlying stressed assets in corporate sector must be sold or rehabilitated
-Government could sell off certain non-financial companies to infuse capital in state-run banks
- Government proposes to make available Rs 70,000 crore via budgetary allocations during current, succeeding years in banks
