Economic Survey 2016

Alqama Pervez

The present and the future

GDP estimate for 2015-16: 7.6%
Forecast for 2016-17: 7-7.75%
Inflation projection: 4.5-5.0%
Global environment grim

The global scenario

Declining prices of commodities, especially oil
Turbulent financial markets, especially equity
markets
Volatile exchange rates
Extreme risk aversion behavior of global
investors

Reasons for India's growth despite

a grim global environment
Transparency
Ease of doing business
Stability and
predictability in
taxation
Public investment in
infrastructure
FDI liberalization
JAM trinity

Crop insurance,
irrigation, Soil Health
Card
Boost to start ups and
MSMEs (Stand Up
India, Mudra)
Attempt to change
social behavior
Avoiding policy reversal

Where we failed?
GST
Subsidy rationalization
Disinvestment
Twin Balance Sheet problem

What's the Twin Balance Sheet

problem?
Banks marred with NPAs, corporate houses hit
by losses
Solution: 4R's - Recognition, Resolution,
Recapitalize, Reform

Other areas of concern

Debt to GDP ratio: 67%. Ideal:60%
Decline in exports of services
Corporate sales are flat

The Chakravyuha Challenge

Socialism with restricted entry to
marketism without exit

Cost of impeded exit

Fiscal costs:
(a)Support and bailouts
(b)Subsidies

Economic costs:
(a) inefficient use of resources and factors of production
(b) Sick companies unable to repay debts
(c) Market distortions

Political costs:

Why does the exit problem exists?

3 I's:
Interests - vested interests
Institutions - weak & strong
Idea/Ideology

Solution to the exit problem

1.Better laws and policies
2.More liberalization - to induce competition
3.Transparency
4.Technology and JAM
5.Exit as an opportunity

Spreading the JAM

Jan Dhan
Aadhar
Mobile

Challenges in benefit transfers

First mile - identification of beneficiaries Aadhar
Middle mile - the actual transfer - Jan Dhan
Last mile - accessibility - Mobile

Indian Agriculture

Problems with Indian Agriculture

Cereal-centric
Regionally biased
Input intensive

What needs to be done?

Rainbow revolution
Increase productivity
Irrigation
Change MSP policy
Integration of markets
R&D
Intermediaries and middlemen

Bounties for the well-off

Poor targeting of subsidies

Total subsidies to the well-off

exceed 1 lakh crore

Small savings
LPG
Aviation
Railways
Kerosene
Gold

Fiscal capacity
"India under-taxes & under-spends" Thomas Piketty

 India's tax to GDP ratio is 16.6%

Only 4% of voters pay taxes

Reforms needed

Do not raise tax slabs

Do away with as many exemptions as possible
Reduce corruption and increase transparency
Tax the better off irrespective of their income
sources
More focus on taxing property

Preferential Trade Agreements

42 and counting...

Trends
India's FTA's mostly with Asian countries
Both imports and exports have increased,
imports have increased more
ASEAN FTA has had the greatest impact
Biggest impact on metals on the import side
and textiles on the export side

Fertilizers

Issues
Heavy black marketing & even cross-border
smuggling
Overuse
Production inefficiencies

Reforms needed
One product one price
DBT
Universal with cap

Labor markets
For utilizing the demographic
dividend

Emerging trends
Contract labours
Competitive federalism
Relocation