Zee Media Bureau
The pre-Budget Economic Survey, tabled in Parliament on Friday by Finance Minister Arun Jaitley called for improving business environment by making regulation and taxes less onerous to help push growth to 8.1-8.5 percent next fiscal, and to double digits in the coming years.
"India has reached a sweet spot and there is scope for Big Bang reforms now," said the Survey on the eve of the new government's first full-year Budget, to be presented by Finance Minister Arun Jaitley.
Also Read - Economic Survey 2015: FY16 growth to top 8%; 4.1% fiscal deficit a 'daunting task'
A clear political mandate for reforms and a benign external environment, it said, "is now expected to propel India to double digit growth trajectory". The BJP-led NDA government came to power in May last year wining a clear mandate.
Other areas highlighted by the Survey include reforming labour laws, building infrastructure and enabling connectivity to reduce cost of doing business in the country.
"In the short run, growth will receive a boost from lower oil prices, from likely monetary policy easing facilitated by lower inflation and lower inflationary expectations, and forecast of a normal monsoon," the Survey said.
It also indicated that the growth during 2014-15 may touch 8 percent on better farm output. The CSO had projected growth at 7.4 percent for current fiscal.
India must adhere to the medium term fiscal deficit target of 3 per cent of the GDP, it said, adding "this will provide fiscal space to insure against future shocks and also to move closer to the fiscal performance of its emerging peers.
Highlights of Economic Survey 2015
INFLATION, GROWTH
* Evidence shows India recovering, but not yet surging
* Upside risk to inflation from monsoon, crude price
* Inflation showed declining trend during April-December
* Inflation not seen up significantly from current level
* Monetary framework to show commitment to low inflation
* Inflation likely to remain in 5.0-5.5% range
* Jan Dhan plan, Aadhaar to help target subsidies
* Outlook for macro economy generally optimistic
* FY15 price subsidy pegged at 4.24% of GDP
* GDP growth points to industrial recovery
* GST, direct benefit transfer to be game changers
* Recommend retail FDI reform to better farm supply chain
* India must adhere to medium term fiscal gap target of 3%
* GST, direct benefit transfers to be game changers
* Labour, capital, land market distortions limit economic growth
* FY15 GDP growth largely driven by domestic demand
* Fall in crude prices has compressed import bill
* Budget aim of gross tax revenue growth over estimated
* Economy appears to have gone past slowdown
* Double digit economic growth trajectory now a possibility
* Growth to get boost from likely monetary policy easing
* Muted export growth source of concern
* Private investment must be engine of long-term growth
* India in a sweet spot for big bang reforms now
* Subsidy doesn't seem best weapon to fight poverty
* May have to cut some spending FY15 to meet fiscal gap aim
* Need to cut expenditure if revenue not picking up
* Macro-economic fundamentals have dramatically improved
* Falling inflation likely to persist going forward
FISCAL HEALTH
* Govt remains committed to fiscal consolidation
* Need medium to long-term fiscal policy framework
* Govt borrow should fund invest, not for current spend
* Fiscal consolidation quality key to make it sustainable
* Urge govt to aim to bring dn fiscal gap to 3.0% of GDP
* Higher tax share to states won't impact fiscal discipline
* Must start expenditure control process to cut fiscal gap
* India forex reserves 2nd largest among economies with CAD
INDUSTRY, INFRASTRUCTURE
* Divest mop-up so far Rs 240 billion this FY
* Coal price reform must factor in impact on power price
* Banking hobbled by policy that impedes competition
* Potential for further gains from coal pricing reforms
* Public invest in railways to be key to growth revival
* High rail freight rates hinder industry competitiveness
* Private investment must remain primary engine of longrun growth
* Railway freight rates among the highest in the world
REFORMS
* Scope for big-bang reforms now
* Link post office with Aadhaar-based benefit transfers
* Potential for large gains from coal pricing reforms
AGRICULTURE
* Need national common market for farm goods
* Need law amendment for trading in some agri commodities
* Market distortion key problem in farm growth
* FCI rejig panel report ideas useful for food policy
* Rs 107.82 billion food subsidy given as of January 9, up 20%
* Agricultural strategy must focus on raising yield, productivity
* Food grain output 2014-15 seen 257.07 million tonnes
* All states urged to drop fruits, vegetables from APMC
* Structural shifts in inflationary process underway
* Favour constitutional clause for common farm goods market
* Asked states for policy help to farm markets in private sector
FINANCIAL SECTOR, MARKETS
* Must remove market access barriers to boost services sector
* Must boost capital market, bond financing going forward
* Capital, labour, land market distortions hurting manufacturing
* SLR need, priority lending creating fincl repression
* Commercial banks saw increase in gross NPAs
* Foreign portfolio flows have stabilised the rupee
* Trade performance signals good time to scrap gold curbs
* Must create extra fiscal space to ensure economic stability
* Undertaken major reform steps for banks, insurance
* India ranks well above the mean for BBB invest grade
* See some stress on asset quality of commercial banks
* Rising non-oil, non-gold imports source of concern
* Liquidity conditions remained broadly balanced
* Low inflation makes space for easing monetary condition
* Ensure borrow over the cycle only for capital formation
* Steps taken by RBI played key role in liquidity management
* Need to conclude monetary policy framework agreement
* Oil prices expected to stay benign in coming months
SUBSIDY
* Also need to rationalise subsidies to free resources
* Need to target beneficiaries better to free resources
* Ending, phasing out subsidy not feasible, nor desirable
* Subsidy on power can only benefit relatively rich
* Current study shows rich benefiting more from subsidy
* Price subsidy often regressive
* Subsidy reform to rationalise expenditure
* Subsidies via direct benefit transfers laudable goal
* Rationalisation of food subsidies needs more effort
INVESTMENT
* India ranks among most attractive invest destinations
* Invest activity seems grounded on stronger footing
* PPP model should be revitalised
* Favour greater public invest in railways
* Investment stuck in stalled projects at about 7% of GDP
* Public invest can revive growth engine in short run
* PSUs, especially railways, must lead public investment
* Expenditure switch from consumption to invest to be key
FY15 ESTIMATES
* FY15 weak import largely on sharp fall in crude prices
* FY15 saw hardly any external support to growth
* FY15 growth largely domestic demand driven
* FY15 fiscal deficit of 4.1% of GDP will be met
* FY15 CAD estimated at 1.3% of GDP
* States showed fall in share of mfg in their GDP FY15
* April-December major subsidies up 12.5% on year
* Services sector clocked double-digit growth in FY15
* Equity markets continued to do well in FY15
* FY15 price subsidy pegged at 4.24% of GDP
FY16 OUTLOOK
* 8.5% GDP growth in FY16 in realm of possibility
* 8% economic growth on assumption of favourable monsoon
* FY16 econ growth seen 8.1-8.5%
* External sector outlook most favourable since 2008
* Liquidity conditions seen comfortable in FY16
* Economy to over perform on inflation, make way for rate cut
* FY16 GDP deflator seen 2.8-3.0%
* Outlook for domestic macro economic parameters optimistic
* CAD seen less than 1.0% of GDP in FY16
* Outlook favourable for CAD, its financing
* Inflation to be 0.5-1.0% lower than RBI's target
* FY16 CPI inflation to be in 5.0-5.5% range
MISCELLANEOUS
* Enhanced revenue generation remains govt priority
* Must scrap some norm to realise potential of services sector
* Stalling of projects seems to have plateaued
* Enhanced revenue generation is a priority going forward
* Skill development, employment major challenges
* Hyper-growth in tech start-ups, service sector
* Can balance higher public invest with fiscal discipline
* Rural penetration of IT services to drive 'Make in India'
* India is at threshold of an urban flare-up
* Will soon scale up renewable energy capacity to 170 GW
* Insurance penetration up to 3.9% 2013 from 2.3% in 2000
* Portfolio flows pressurising long-term interest rates
