02 February, 2017
The Economic Survey 2016-17 tabled by chief economic adviser Arvind Subramanian on Tuesday expects economic growth to moderate to 6.5 percent in the current fiscal year ending March 2017, down from 7.6 pecent reported in the previousl fiscal. The survey has predicted a growth rate of 6.75% - 7.5% for FY 2017-18, given remonetisation happens by April 2017.
"The follow-up actions to minimise the costs and maximise the benefits include fast, demand-driven remonetisation, (and) further tax reforms", the Survey, presented in Parliament by Finance Minister Arun Jaitley, said.
About the immediate adverse impact of demonetisation, the Survey noted that there have been reports of job losses, declines in farm incomes, and social disruption, especially in the informal, cash-intensive parts of the economy. While it was assumed by most sources that the GDP growth continued at 7.6% it has now been confirmed that the growth rate has been reduced to 6.6% by International Monetary Fund (IMF).
It has differentiated demonetisation's impact on the formal and the informal economy by saying the GDP estimate does not cover the informal sector.
Despite Mr Subramanian's cautious assessment, private sector economists said it was important he at least recognised that demonetisation had taken a toll on the Indian economy. It also perceives an increase in income tax collection as people were forced to deposit unaccounted cash in the banks.
Still, Mr Subramanian acknowledged that official GDP figures may not fully reflect the "real and significant hardships" experienced by the informal sector, in which an estimated nine out of 10 Indian workers are employed.
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However, the survey said that as the economy is remonetised and conditions normalise, the uncertainty should dissipate and spending might well rebind toward the end of the fiscal year.
The government must continue with incentives for digital payments if it wants to realise its dream of a cash-lite economy, the Economic Survey 2016-17 has recommended.
Asset rehabilitation: Survey suggests setting up of a centralised Public Sector Asset Rehabilitation Agency that will look after the largest, most hard Cases, and make Politically Tough Decisions to reduce Debt.
Released on Monday, the annual Economic Survey says that the scheme would almost eradicate poverty - although it says there are "considerable implementation challenges" which have to be addressed first.
Invoking Mahatma Gandhi's vision of "wiping every tear from every eye", it made a pitch for implementing Universal Basic Income (UBI) to entitle the poor with at least some income and thus eliminate poverty. It said Chinese credit expansion in 2009 pushed the credit-to-GDP ratio higher by 63 percentage points of GDP, which was much higher than India's credit-to-GDP ratio. For 2017-18, it is expected that the growth would return to normal as currency notes are replenished.