Economic Survey 2018: Exports, investment continue to run below take-off speed
New Delhi: The Economic Survey 2017-18 on Monday forecast economic growth to accelerate in 2018-19 to touch up to 7.5 per cent “reinstating India as the world’s fastest growing major economy”.
The other risk which can emerge is if the booming stock markets (Sensex touched a new lifetime high of 36,283 on Monday) corrected sharply, provoking a “sudden stall” in capital flows.
The Survey also warned against setting “overly ambitious” fiscal consolidation target in the Union Budget on Thursday which could compromise the economic growth.
The pre-budget survey suggested following a modest consolidation that credibly signals a return to the path of gradual but steady fiscal deficit reductions. As per the roadmap, the government aims to contain the fiscal deficit for 2017-18 at 3.2 per cent of the GDP, and further tighten it 3 per cent in 2018-19.
The Survey said that as far as demonetisation is concerned, the cash-to-GDP ratio has stabilised, suggesting a return to equilibrium.
“The stabilisation also permits estimation of the impact of demonetisation: about Rs 2.8 lakh crores less cash (1.8 per cent of GDP) and about Rs 3.8 lakh crores less high denomination notes (2.5 per cent of GDP),” it said.
The Survey said that the recovery is taking hold as reflected by a variety of indicators, including industrial production data, gross capital formation and exports.
However, it said that the twin engines (exports and investment) that propelled the economy's take-off in the mid-2000s are continuing to run below take-off speed.
The Survey said that the country’s GDP decoupled from the global economy in the first half of FY18 as it slowed down even as rest of the world was growing as India’s growth was hit due to demonetisation, teething problem witnessed during GST implementation and high interest rates.
It also claimed a 50 per cent increase in indirect taxpayer base post GST, adding that the note ban led to wider taxpayers' base and more household savings
It said that many of the new tax filers after demonetisation and GST reform were in the slab of Rs 2.5 lakh annual income who don’t need to pay any tax.
But, the Survey was hopeful that as income growth over time pushes many of the new tax filers over the threshold, the revenue dividends should increase robustly.
However, it said that due to various measures taken by the government to curb black money generation, there was Rs 65,000 and Rs 90,000 crores increase in income tax collection in the past two years.
The Survey said that while there are significant social and economic benefits to attacking corruption and weak governance, addressing those pathologies entails challenges. “In the case of the GST and demonetisation, informal cash-intensive sectors of the economy were impacted,” it said.
