Key Features of Union Budget 2018-2019
This year Ministry of Finance, GOI reverted to the tradition of bringing out Volumes 1 and 2 of Economic Survey at the same time.
Volume 1 of Economic Survey contains the analytical overview and more research-cum-analytical material whereas Volume 2 provides the more descriptive review of the current fiscal year, encompassing all the major sectors of the economy.
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Download Economic Survey 2017-18 Volume 1 Click Here
Download Economic Survey 2017-18 Volume 2 Click Here
Economic Survey represents the ministry’s view on the annual economic development of the country and it is prepared under the guidance of the Chief Economic Adviser, Finance Ministry. This document is presented to both houses of Parliament during the Budget Session.
If we talk about the recently released Economic Survey document i.e. 2017-18, Its Volume 1 focuses on contemporary issues related to indian economy such as the GST, the investment-saving slowdown, fiscal federalism and accountability, gender inequality, climate change and agriculture, delays in the appeals and judicial process, and science and technology. Volume 2 deals with an overview of India’s economic performance 2017-18, fiscal developments, monetary developments, inflation, sustainable development, energy and climate change, external sector, service sector, social sector, agriculture and food management, industry and infrastructure, labour reforms, political empowerment of women and Swachh Bharat Mission (Gramin).
Finance Minister Arun Jaitley has tabled the Economic Survey of India 2018. India’s GDP is estimated at 7-7.5%.
The Key Focus Areas of Economic Survey Report 2017-18
- The survey points out that as per the quarterly estimates; there was a reversal of the declining trend of GDP growth in the second quarter of 2017-18, led by the industry sector. The Gross Value Added (GVA) at constant basic prices is expected to grow at the rate of 6.1 per cent in 2017-18 as compared to 6.6 per cent in 2016-17.
- The survey underlines that due to the launch of transformational Goods and Services Tax (GST) reform on July 1, 2017, resolution of the long-festering Twin Balance Sheet (TBS) problem by sending the major stressed companies for resolution under the new Indian Bankruptcy Code, implementing a major recapitalization package to strengthen the public sector banks, further liberalization of FDI and the export uplift from the global recovery, the economy began to accelerate in the second half of the year and can clock 6.75 percent growth this year.
- The Economic Survey of India points out that the GDP growth has averaged 7.3 per cent for the period from 2014-15 to 2017-18, which is the highest among the major economies of the world. That this growth has been achieved in a milieu of lower inflation, improved current account balance and notable reduction in the fiscal deficit to GDP ratio makes it all the more creditable.
- The Economic Survey 2018 also stated that fears of major producing states that the shift to the new system would undermine their tax collections have been allayed as the distribution of the GST base among the states got closely linked to the size of their economies.
- Major achievements of past year 1) Implmntng GST, respnding quickly to transitional challnges 2) Tacklng longfestering Twin Balance Sheet challnge by sendng stressd debtors to IBC & bank recap Validation
- GST data reveals 50% increase in number of Indirect Taxpayers,, according to the Economic Survey of India 2018
- The policy agenda for the coming year: support agriculture; stabilize GST; finish resolution and recapitalization; privatize Air India; head off macro-economic pressures.
- The survey points out that India can be rated as among the best performing economies in the world as the average growth during last three years is around 4 percentage points higher than global growth and nearly 3 percentage points higher than that of emerging market and developing economies.
- India Economic Survey said that the GDP growth has averaged 7.3 per cent from 2014-15 to 2017-18, which is the highest among the major economies of the world. This growth has been achieved in a milieu of lower inflation, improved current account balance and notable reduction in the fiscal deficit to GDP ratio makes it all the more creditable.
- Economic Survey 2018 shows India’s formal sector, especially formal nonfarm payroll, is substantially greater than what it currently is believed to be. It became evident that when “formality” was defined in terms of social security provisions like EPFO/ESIC the formal sector payroll was found to be about 31 percent of the non-agricultural work force. When “formality” was defined in terms of being part of the GST net, such formal sector payroll share was found to be 53 percent.
- India‘s exports are unusual in that the largest firms account for a much smaller share of exports than in other comparable countries. Top one percent of Indian firms account only for 38% of exports unlike in other countries where they account for substantially greater share –(72, 68, 67 and 55 percent in Brazil, Germany, Mexico and USA respectively). Such tendencies were also found to be true for the top five or ten per cent of the Indian companies.
- Economic Survey 2017-18 states that within India, there is significant heterogeneity, with the North-Eastern states (a model for the rest of the country) consistently out-performing others and not because they are richer; hinterland states are lagging behind but the surprise is that some southern states do less well than their development levels .
- India Economic Survey encouragingly notes that gender outcomes exhibit a convergence pattern, improving with wealth to a greater extent in India than in similar countries so that even where it is lagging, it can expect to catch up over time. Economic Survey 2017-18, however, cautions that on several other indicators, notably employment, use of reversible contraception, and son preference, India has some distance to traverse because development has not proved to be an antidote.
- The Economic survey 2017-18 acknowledges that government‘s Beti Bachao, Beti Padhao and Sukanya Samridhi Yojana schemes, and mandatory maternity leave rules are all steps in the right direction. The Survey states that just as India has committed to moving up the ranks in Ease of Doing Business indicators, a similar commitment should be endeavored on the gender front.
- GST launch was one of the major takeaways from financial year 2018. There was a boost in registered direct and indirect taxpayers: A 50 percent increase in unique indirect taxpayers under the GST vis-a-vis the pre-GST system & an addition of about 1.8 million individual income tax filers since November 2016.
- There has been a large increase in voluntary compliance under GST. The working of GST Council has shown that cooperative federalism can really work. About 36% of total GST filers, eligible for composition scheme or could have opted out from GST (below GST threshold), filed regular GST returns in first 5 months. GST data provides new estimates of inter-state trade within India: about 60 percent of GDP, more than the 54 percent estimated in last year’s Survey.
- As India emerges as one of world’s largest economies, it needs to gradually move from being a net consumer of knowledge to becoming a net producer.
- The Modi government has also been recommended to take “radical follow-up action” to achieve its objective of addressing agricultural stress and doubling farmers’ income.
- Economic Survey 2017-18 says that climate change could adversely affect farmers income by up to 20-25 per cent in the medium term, India Economic Survey warned and suggested the need for “dramatic” improvement in irrigation, use of new technologies and better targeting of power and fertiliser subsidies.
- The latest India Economic Survey 2018 tabled in Parliament pointed out that India needs to “rekindle” the excitement and purpose that would attract more young people to scientific enterprise as the country is emerging as one of the world’s largest economies.
- India needs to gradually move from being a net consumer to a “net producer of knowledge” in order to address some of the country’s most pressing development challenges. A number of reforms to boost industrial growth include Make in India programme, Start-up India and Intellectual Rights Policy.
- On the Ease of doing Business, the Economic Survey 2018 highlights that India has leapt 30 ranks over its previous rank of 130 in the World Bank‘s latest Doing Business Report 2018. Credit rating company Moody‘s Investors Service has also raised India‘s rating from the lowest investment grade of Baa3 to Baa2.
- Importantly, the survey recognises the importance of education to prepare the workforce, employment for sustainable growth and agriculture as factors that need to be focussed on immediately. Proactive and efficient policy initiatives in these areas can bear fruit and help move the growth trajectory upwards over the next few years.
- For the next fiscal FY19, the survey forecasts growth in the range between 7-7.5% and show a meaningful acceleration in the growth momentum. We expect growth to be around the lower end of the band as higher oil prices are likely to take away some part of growth.
- The India Economic survey 2017-18 provides a holistic picture of the achievements over the last year and the challenges for the next year. The expectations on GDP growth for the current year at 6.75% clearly signal that the advance estimates were slightly conservative and growth is likely to be slightly higher that forecast.
- The demonetisation of high value currency notes in November 2016 resulted in widening of taxpayers’ base and rise in household savings, said the Economic Survey 2017-18.
- Besides, the economic survey 2018 said one of the main aims of demonetisation and the Goods and Services Tax (GST) was to increase the formalisation of the economy and bring more Indians into the income tax net, which includes only about 5.93 crore individual taxpayers (filers and those whose tax is deducted at source in 2015-16).
- As per the Economic Survey 2017-18 analysis, new filers reported an average income, in many cases, close to the income tax threshold of Rs 2.5 lakh, limiting the early revenue impact. “As income growth over time pushes many of the new tax filers over the threshold, the revenue dividends should increase robustly.
- Taking seasonality into account it is found that there is a 0.8 per cent monthly trend increase in new tax filers (annual growth of nearly 10 per cent). The level of tax filers by November 2017 was 31 per cent greater than what this trend would suggest, a statistically significant difference. This translates roughly into about 18 lakh (1.8 million) additional taxpayers due to demonetisation-cum-GST, representing 3 per cent of existing taxpayers.
- The average price of the basket of crude India imports rose by around 14 per cent in the current fiscal and is projected to further rise by 10-15 per cent in 2018-19, the Survey said. GDP may be impacted by 0.2-0.3 per cent, inflation will be higher by 0.2-0.3 per cent and current account deficit widen if oil prices were to rise by USD 10 per barrel.
- The economy “seems to be picking up quite nicely and robustly” as temporary impact of demonetisation and GST has been decimated. The growth would be higher if exports pick up, he said but listed oil prices and a correction in elevated share prices as downside risks.
- “Against emerging macroeconomic concerns, policy vigilance will be necessary in the coming year, especially if high international oil prices persist or elevated stock prices correct sharply, provoking a ‘sudden stall’ in capital flows,” the Economic Survey 2018 pdf has warned.
- However, it said that with world growth likely to witness moderate improvement in 2018, expectation of greater stability in GST, likely recovery in investment levels, and ongoing structural reforms should support higher growth. “On balance, country’s economic performance should witness an improvement in 2018-19.”
- For the next year, the Economic Survey prescribed: “Stabilising the GST, completing the twin balance sheet actions, privatising Air India, and staving off threats to macro-economic stability. “Over the medium term, three areas of policy focus stand out: Employment – finding good jobs for the young and burgeoning workforce, especially for women; Education -creating an educated and healthy labour force; Agriculture -raising farm productivity while strengthening agricultural resilience.”
- Climate change could adversely affect farmers income by up to 20-25 per cent in the medium term, the Economic Survey 2018 warned and suggested the need for “dramatic” improvement in irrigation, use of new technologies and better targeting of power and fertiliser subsidies.
- The Economic Survey 2018 noted that some 35 million tonnes of rice paddy in three adjoining states (Punjab, Haryana and Western UP) are burnt in late October, whose plumes drift eastward, and seasonal load from other sources, including fire crackers during Diwali are top reasons for Delhi’s poor air quality.
- Citing various reports according to which Delhi accounts for one of the unhealthiest cities in the world in terms of air pollution, the survey said effective actions suggested by National Green Tribunal, the Supreme Court and others call for strict enforcement through heavy penalties on agricultural waste burning and incentive payments to farmers.
- The farmers mainly from Northern India set their paddy fields on fire after harvesting. The resultant smoke, however, gets carried by winds all the way to Delhi and beyond, adding to the existing suspended particulate matter (SPM) and noxious substances that clog lungs and leave behind a near eclipsed sun.
- Besides, implementation of congestion pricing, expansion of public buses, phasing out of old vehicles as also coordination across agencies and governments can prevent the city turning into a gas chamber, especially during winters, the india Economic Survey 2018 noted.
- Heavy penalties should be imposed for burning agricultural waste, and more incentive for farmers is needed to prevent alarmingly poor air quality in Delhi-NCR and adjoining areas, the Economic Survey 2018 pdf said.
Sources PIB India, India Budget and Financial Express
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