Economic Survey 2015-16 HIGHLIGHTS: Over 8% growth in next couple of years; pitches for more reforms, GST

Zee Media Bureau

New Delhi: Three days before the Union Budget 2016, the Economic Survey on Friday pegged the country's economic growth at a conservative level of 7-7.75 percent for the next fiscal, while pressing for more reforms, subsidy cuts and sticking to fiscal consolidation timetable.

The Economic Survey 2015-16 presented in the Parliament today by the Finance Minister Arun Jaitley stated that the benign price situation and comfortable level of external current account in the country makes it possible now for growth rates of 8 percent or higher in the next couple of years.

It said as the government is committed to carrying the reform process forward and conditions exists today for such growth aided by the prevailing macro-economic stability.

The Survey also called for expeditious implementation of the Goods and Services Tax (GST), which it described as an unprecedented reforms measure.

The next fiscal, it said, will be "challenging" as the government will have to allocate additional resources for implementing the Seventh Pay Commission award.

However, it projected the inflation to decline to 4.5-5 percent in the 2016-17, within the Reserve Bank of India's target, while the current account deficit would remain low at 1-1.5 percent of the GDP.

Here are the Highlights of Economic Survey

GROWTH	INFLATION	FISCAL HEALTH
MONETARY POLICY	TAXATION	EXTERNAL SECTOR
FARM SECTOR	OTHERS

GROWTH

* Expect FY16 GDP growth rate in 7-7.75% range
* FY16 GDP growth seen 7.6%
* FY17 economic growth seen 7-7.5%
* India's long run growth potential 8-10%
* Industry growth estimated to have accelerated in FY16
* India growth to face headwinds if world econ stays weak
* Real growth accelerating, nominal falling
* Chances of FY17 growth rising significantly not high
* FY16 subsidy bill seen below 2% of GDP
* Pay commission to add 0.5% of GDP to wage bill
* Income gain from low oil price roughly equals 1% of GDP
* Not very high chance FY17 GDP may rise sharply vs FY16
* FY16 real per capital income growth seen 6.2%
* At 66% of FY16 growth, services remain key economic driver
* FY16 industrial growth seen 7.3%, manufacturing growth 9.5%
* Short term economic growth depends on global growth, demand
* Debt to GDP ratio suggests economy on sustainable path

INFLATION

* Low inflation has taken hold
* Inflation may undershoot aim with current RBI stance
* Pay panel proposals may have little impact on inflation
* CPI inflation to ease to 4.5-5% FY17

FISCAL HEALTH

* FY16 fiscal deficit target seems achievable
* Govt to meet FY16 fiscal deficit target of 3.9% of GDP
* CAD at 1.4% of GDP April-September
* Credibility argues for adhering to 3.5% fiscal aim FY17
* Need to assess FY17 fiscal stance on inflation outlook, growth outlook
* FY17 expected to be challenging from fiscal point
* Trade gap declined April-January to $106.8 bn vs $119.6 bn
* Focus on fiscal limits room to up govt consumption spend
* Quality of spend key for sustained fiscal consolidation
* Better-targeted subsidies to help fiscal consolidation
* Fiscal gap impact on long-term rates may be lower in India
* LPG subsidy via direct transfer cut leakages by 24%
* Growth, fiscal outlook changed after 14th finance panel
* Time right for review of medium term fiscal framework
* Budget to carefully assess fiscal consolidation options
* Case for both aggressive, moderate fiscal consolidation
* 7th pay panel, OROP to put extra burden on FY17 spend
* Fiscal outlook hinges on interest-growth differential

MONETARY POLICY

* RBI should be able to meet 5% inflation aim by March 2017
* Current RBI policy rate seems "neutral"
* Recapitalisation, reform needed to resolve bank issues
* FX reserves as on February 5 at $351.5 bn
* Prospects of aggressive Fed rate hike receding
* Effective stance of monetary policy could be relaxed
* PSU banks to need 1.8 trln rupee capital by FY19
* Plan to infuse 700 bn rupees in PSU banks in few years
* Can convert land held by PSUs into land bank
* Liberal entry of banks an option to lower role of PSU banks

TAXATION

* Tax base should widen to over 20% from 5.5% now
* Need to phase out tax exemptions
* Property taxation an area needing "urgent attention"
* Higher property tax rates to check realty speculation
* Reasonable taxation needed on farm, realty income
* Recommend not raising income tax exemption threshold
* Higher property tax to improve local govt finances
* For phasing out tax exemptions that benefit private sector
* Need for reasonable taxation for better-off individuals
* Need to improve tax compliance to keep deficit in check

EXTERNAL SECTOR

* Exports may pick up FY17
* Headwinds to growth may come from weak global demand
* Export slowdown may continue for a while
* FTAs leading to higher imports, exports
* India must plan for major currency readjustment in Asia
* Correlation between India, world growth rate sharply up
* India compares favourably with peer economies
* Foreign demand seen weak
* Not wise to rely on contribution from improving exports

FARM SECTOR

* India farm growth seen low for second year in a row
* La Nina to have positive impact on farm
* Fertiliser subsidy should shift to direct cash transfer
* Subsidised fertiliser bag purchase cap to improve targeting
* Must bring urea under Nutrient Based Subsidy programme
* Need to expand acreage under irrigation
* Need to rationalise fertiliser subsidy based on inputs, crops
* Need deft supply management as rabi output seen low

OTHERS

* Confidence in price stability has improved
* Budget will have to contend with global economic situation
* Need major investment in health, education
* India haven of stability amid gloomy global economy
* 7th pay panel, good monsoon can up domestic consumption
* Need active domestic demand sources to protect growth
* Wage hike, public investment may up deficit substantially
* Public invest may need to be increased to push infra
* Focus on fiscal consolidation limits public spending
* CAD has declined, forex reserve up
* Current prospects show oil price might average $35/bbl FY17
* Need reasonable taxation on better-off farmers
* Large farmers may have to buy urea at market price
* Weak rupee may partially offset gain from low oil price
* Need better targeting of subsidies to the poor
* Food subsidy up 10.4%, fertiliser subsidy up 13.7% Apr-Dec
* Major subsidies down 1.7% as oil subsidy down 44.7% Apr-Dec
* External debt within safe, comfortable limit
* Can lower policy rate consistent with inflation aim
* Can ease liquidity to align it with RBI policy
* Electricity tariffs unusually high for Indian industry
* Complex power tariff limits response to price signals
* See good infrastructure performance on recent reforms
* See good industrial, corporate performance on reforms
* Bank appetite for additional bond issue seen limited
* Women constitute 57% rural job plan beneficiaries FY16
* Despite global volatility, Indian shares fairly resistant
* Apr-Oct FDI equity inflow in services up 74.7% at $14.8 bn
* Scope to charge rich households higher power tariffs
* Case for freeing local movement, import of farm goods
* High industrial power tariffs hurt 'Make in India'
* Case for replacing MSP, PDS with direct cash transfer
* Signs of moving to one market in power becoming evident
* See some scope to up spectrum auction receipts
* See some scope to increase divest receipts
* Need to cut 1 trln rupee subsidies going to well-offs
* Credit offtake by industry has been slowing
* Need to tax the better-off, regardless of income source
* Govt determined to put debt ratio on downward path
* Low oil prices likely to dampen inflation expectations
* Banks must improve capital base to meet unforeseen losses
* Industry sector credit off-take has been slowing
* Credit growth weak as banks unwilling to lend as NPAs up
* Weak credit growth due to incomplete rate transmission
* Interest, growth differential may not normalise soon
* Subsidies going to the better-off; rectify anomalies
* Need to arrest decline in invest credit in agriculture
* India has robust macroeconomic fundamentals
* Need to move fertiliser subsidy to direct benefits transfer
* India can be leading invest place as global markets settle