Economic Survey 2017-18

Analysis (Part 1)

Shyam S Kaggod

Economic Survey – Important Points

• Two Volumes• Volume 1-Theoreotical

• Volume 2-Factual

• Do not read all the pages of Vol 2

• Supplement the information from the budget

• Questions can from both the volumes in both Prelims and Mains

Vol 1-Contents• State of the Economy: An Analytical

Overview and Outlook for Policy

• A New, Exciting Bird’s-Eye View of the Indian Economy Through the GST

• Investment and Saving Slowdowns and Recoveries: Cross-Country Insights for India

• Reconciling Fiscal Federalism and Accountability: Is there a Low Equilibrium Trap

• Is there a “Late Converger Stall” in Economic Development? Can India Escape it?

• Climate, Climate Change, and Agriculture

• Gender and Son Meta-Preference: Is Development Itself an Antidote

• Transforming Science and Technology in India

• Ease of Doing Business’ Next Frontier: Timely Justice

Vol 2-Contents• An Overview of India’s Economic

Performance in 2017-18

• Review of Fiscal Developments

• Monetary Management and Financial Intermediation

• Prices and Inflation

• Sustainable Development, Energy and Climate Change

• External Sector

• Agriculture and Food Management

• Industry and Infrastructure

• Services Sector

• Social Infrastructure, Employment and Human Development

Some achievements

• GST council provides an opportunity

• IBC to take care of TBSP

• Rationalization of revenue expenditure

V1C1

Two Vulnerabilities – Twin Deficits

• FD

• CAD

V1C1

How to overcome FD?

V1C1

How to overcome CAD?

• Promote exports

• Promote Make In India

V1C1

Indian Decoupling

V1C1

Indian Decoupling-Reasons-Real Interest Rates (MP)

V1C1

Reasons for Decoupling – Real Interest Rates

V1C1

Indian Decoupling-Reasons-Demonetization

V1C1

Indian Decoupling-Reasons-TBS Challenge

V1C1

Indian Decoupling-Reasons-TBS Challenge

V1C1

Indian Decoupling-Reasons-Oil Prices

V1C1

Outlook

• For 2017-18

• For 2018-19

V1C1

The government needs to

• Banking Reforms (Recapitalization and Consolidation)

• Stable GST

• Privatizing Air India

• Counter disruptions to the economy

V1C1

The Global Outlook

• As per the World Economic Outlook, the global GDP growth • 2016 - 3.2%

• 2017 - 3.6%

• 2018 - 3.9%

V1C1

GST

• Is a unified indirect tax

• Is a destination/consumption based tax

• Came into effect from 1st July 2017

• Will lead to creation of a national market

• GST has a dual structure

• One hidden benefit is – Repository of Information

V1C2

Taxpayer Base

V1C2

Tax base & Spatial distribution

• The size of the tax base and Revenue Neutrality

• The concern of the manufacturing states that a destination based

V1C2

Concern of the manufacturing states

V1C2

Size of the firms and their transactionsV1C2

International Trade, Inter-state trade and Economic Prosperity

• 5 states-Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana-account for 70% of India’s exports

• The inter-state trade in India is above 60% of the GDP• The five largest exporting states are Maharashtra, Gujarat, Haryana, Tamil

Nadu and Karnataka

• The five largest importing states are Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka and Gujarat

V1C2

Relation between prosperity and exports

V1C2

Formality and Informality of the Economy

V1C2

• Hard core Formal (part of tax net & social security net)

• Purely Informal

Savings & Investment - Gross Capital Formation

Gross Savings

Private

Households

(Financial and Physical)

companies

Public

V1C3

GCF

GFCF

Infrastructure such as building, machinery, means of transport,

roads, canal etc

Stock

Change in raw materials, inventories, finished/semi-finished

goods etc

V1C3Gross Capital Formation

Savings and Investment2003 (% of GDP) 2007 (% of GDP) 2017 (% of GDP)

GFCF 26.5% 35.6% 26.4%

Domestic Savings 29.2% 38.3% 29% (for 2016)

V1C3

Savings & Investment

V1C3

Changes in Savings/Investments

V1C3

Two questions

• What should be given more priority – policies to promote investment or policies to promote savings?

• What is the solution?

V1C3

Way Out

• The government has already• Stepped up public investment

• IBC

• Further it needs to• Easing the costs of doing business

• Creating a clear, transparent and stable tax and regulatory environment

• Creating a conducive environment for small and medium industries to prosper and invest, which will revive private investment

V1C3