Economic Survey 201516 with reforms in key areas, reduction in Macro Vulnerability today PIB

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English Release 18-May 2016

Date 18 Month May Year 2016

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26-February, 2016 12:11 ISTMinistry of Finance

Finance Minister Shri Arun Jaitley PresentsEconomic Survey 2015-16 in the parliament today

Says Rates of 8 Per Cent or Higher Expected in

the next couple of years as there is Macro-Economic Stability now

Economic Survey 2015-16 : with reforms in keyareas, there is reduction in Macro-Vulnerability

today

Indian economy has taken impressive strides withreduction in macro-vulnerability due to reforms inkey areas, pursuit of fiscal prudence and focus on

price stability. The Economic Survey 2015-16 presented in the Parliament today by the FinanceMinister Shri Arun Jaitley states that the benign pricesituation and comfortable level of external currentaccount in the country makes it possible now for growth rates of 8 % or higher in the next couple of years.

It says as the Government is committed to carryingthe reform process forward and conditions existstoday for such growth aided by the prevailing macro-economic stability. The Report portends growth rate in the range of 7 to7.5 per cent in 2016-17. After 7.2 per cent in 2014-15 and 7.6 per cent in 2015-16, such growth rate of over 7 per cent makes India the fastest growing major economy in the world. It states that India’scontribution in the global economy has become muchmore valuable today as China is rebalancing. TheSurvey further mentions that the recent growthreviv al in India is predomina ntly consum ptiondriv en. It says while the growth in se rvices secto r has moderated slightly. The accele rat ion inmanufacturing growth has compensated for the lower growth in agriculture sector, due to two successiveyears of lower than normal monsoon rains.

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The Survey, however, expresses a caution of weak global demand. Post Fourteenth Finance Commission (FFC)recommendations, equilibrium is sought to be

achieved between higher capital expenditure, higher net resource transfers to States and higher gross taxrevenues, the Economic Survey 2015-16 states.

It says that in spite of challenges and lowers than projected GDP growth during 2015-16, the fiscaldeficit target of 3.9 per cent of GDP seemsachievable. This became possible as the Gross TaxRevenue (GTR) targets were achieved, due toimproved tax buoyancy and prudent expendituremanagement, assisted by declining oil prices. The Survey points out that an indication of better fiscal management is that the total expenditure for 2015-16 was estimated at Rs.17.77 lakh crore whichwas 5.7 per cent higher than the revised estimates of 2014-15. A growth of 25.5 per cent was envisaged incapital expenditure, reiterating the focus on quality of expenditure. The notable highlights of the benignfiscal outcome in the current year till December 2015included: robust growth in indirect taxes, increasedtax devolution to the states in line with therecommendations of the FFC, the highest increase incapital expenditure in the last six years and decline inmajor subsidies.


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The Economic Survey 2015-16 further points-out thatthe wholesale price inflation had been in the negativeterritory for more than a year and the consumer priceinflation has also declined to about half of what itused to be in earlier years. It says the astute policiesand management of inflation by the governmentthrough buffer stocking, timely release of cereals andimport of pulses had helped in keeping prices of essential commodities under check during 2015-16. The Survey however indicates that the recurrenceand rebound in the prices of some essential fooditems, as experienced in the second half of the year,indicates that we would require continued deft supplymanagement in the near future.

It points out that with easing of inflation measures,the RBI had brought down the repo rate by 125 basic

points (bps) from the beginning of 2015 to 6.75 per cent by the end of September 2015. It says that theRBI also further conducted various measures likevariable repo rate and reverse repo (overnight andterm) auctions to address the day-to-day liquidity


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requirements. The operating target of monetary policy thus remained closely aligned to the policyrepo rate the Economic Survey 2015-16 asserts. The Economic Survey points-out that there is urgentneed to rationalize agricultural policies includingsubsidies by making them ‘input-crop and region-neutral’ to improve productivity in agriculture. It saysthe adoption of Quality/GM/Pest resistant seeds will

be another pathway to improve the productivity inagriculture. The concerns around GM seeds need to

be resolved through debate and tests. The DirectBenefit Transfer (DBT) mode for inputs like seedsand fertilizer can prevent leakage and diversions inthe system and reach the targeted beneficiaries, theSurvey says. The Survey indicates that there was a good

performance on the front of Government’s initiativestowards achieving the overall goal of FinancialInclusion through Pradhan Mantri JandhanYojana(PMJDY), Pradhan Mantri Suraksha BimaYojana(PMSBY), Pradhan Mantri Jeevan Jyoti BimaYojana(PMJJBY), the Atal Pension Yojana(APY)and setting- up of Micro Units DevelopmentRefinance Agency (MUDRA) in the banking andinsurance sectors. The Survey also points-out as tohow measures were taken to mobilize gold for

productive purposes, through the Sovereign GoldBond Scheme and the Gold Monetization Scheme. It, however, stated that the performance of theScheduled Commercial Banks remained subduedduring 2015 and there had been sluggish growth of

bank credit.

The Survey, however, expects continued good performance by the Industrial, Corporate andInfrastructure Sectors in the wake of various recentreform measures undertaken by the Government. Itsays development of the Infrastructure Sector has

been a priority area for the Government and itwitnessed enhanced public investment. Growth inthe freight carriage by Indian Railways, at Ports, thegrowth in the Civil Aviation Sector,Telecommunication Sector and National HighwaysConstruction have all been impressive.


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Some reform measures which contributed to suchgrowth include: Auctions successfully undertaken for allocation of coal and mines blocks. Improvements in Policy for production sharingcontracts under NELP and testing requirements alongwith a Uniform Licensing and Open Acreage Policyetc., in the petroleum sector has been taken up. Tax-free infrastructure bonds have been allowed for rail, roads and irrigation programmes

National Investment and Infrastructure Fund (NIIF)to extend equity support to infrastructure Non-Bank Financial Companies (NBFC). More open FDI policy has been adopted with FDIallowed for Defence sector up to 49%; Railways100%; Insurance and Pension 49% etc. Apart fromthis, a number of sectors like construction,

broadcasting, civil aviation, plantation, trading, private sector banking, satellite establishment andoperation and credit information companies etc. have

been liberalized.

It points out that the Services Sector continues to bethe key driver of India’s economic growth and itaccelerated to 10.3 per cent in 2014-15 from 7.8 per cent in the previous year and it is expected to be 9.2

per cent (constant prices) in 2015-16 as per theadvanced estimates. This is due to lower growth inPublic Administration, Defence and other Services.There has been a rising trend in FDI equity inflows tothe services sector in the first seven months of 2015-16 with FDI inflows growing by 74.7 per cent. TheReport, however, points out that there has beensluggishness in India’s service exports in the recentmonths due to global slowdown.


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Economic Survey 201516 with reforms in key areas, reduction in Macro Vulnerability today PIB