This Article is From Jul 09, 2014

Economic Survey Sees Higher GDP Growth of 5.4-5.9%; Monsoon, Oil Prices Key Risks

Finance Minister Arun Jaitley today tabled the Economic Survey for 2013-14, a day ahead of the Union Budget. The Economic Survey reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, and highlights the prospects of the economy in the short to medium term.

Here are the top 10 observations from the survey

  1. Economic growth: Economic Survey sees 2014-15 economic growth at 5.4-5.9 per cent.  However, it sees 2014-15 economic growth on lower side of projection due to risks of weak monsoon and high oil prices. The survey sees an improvement in manufacturing growth in 2014-15 as compared to nearly flat growth in 2013-14. The survey says economic growth of 7-8 percent is unlikely before 2016/17. In comparison, Indian economy grew at 4.7 per cent in 2013-14.

  2. Direct Taxes Code: The survey calls for the implementations of Direct Taxes Code as a clean modern replacement for existing income tax laws. The ambitious Direct Taxes Code, which proposed overhaul of the six-decade old Income Tax Act, was introduced in the Lok Sabha on August 30, 2010. The Direct Taxes Code draft had recommended that the combined ceiling for tax-saving investments be raised to Rs 1.5 lakh per annum. The draft had also called for an introduction of a fourth slab of 35 per cent on super-rich with income exceeding Rs 10 crore.

  3. GST: The Economic Survey called for the need to have a simple tax regime with fewer tax exemptions and single rate of goods and services tax (GST). In indirect tax reform, GST has a vital role, the survey adds.

  4. Inflation: The survey says wholesale inflation is showing signs of receding and is expected to decline further. There is a need for common market for agricultural commodities, the survey says.

  5. Fiscal Deficit: The survey called for a sharp fiscal correction by giving more 'teeth' to the Fiscal Responsibility and Budget Management (FRBM) Act. It recommends raising the tax-to-GDP ratio for fiscal consolidation. Fiscal deficit in 2013-14 was 4.5 per cent of the GDP, down from 4.9 per cent in the previous year and 5.8 per cent in 2011-12. The FRBM Act targets 3 per cent fiscal deficit for 2014-15 but Mr Jaitley had earlier said that "I would personally have been happier if the containment of fiscal deficit takes place by expansion of the economy, by greater tax buoyancy, by greater tax collection, rather than by contracting expenditure".

  6. Monetary policy: The survey stresses the need to have a formal monetary policy framework for targeting consumer price inflation.

  7. Subsidies: The survey says subsidy reforms are essential to fiscal consolidation. There is a need to shift subsidy programme from price subsidies to income support, it adds.

  8. Interest rate: The survey says inflation limits scope for the Reserve Bank to cut rates.

  9. Current account deficit: The economic survey underlines significant improvement in Balance of Payment position. India's balance-of-payments position improved dramatically in 2013-14 with current account deficit (CAD) at $32.4 billion (1.7% of GDP) as against $88.2 billion (4.7% of GDP) in 2012-13.

  10. Foreign exchange reserves: The reserves increased from $292 billion at end March 2013 to $304.2 billion at end March, 2014.