Friday, February 26, 2016

HIGHLIGHTS OF ECONOMIC SURVEY 2015-16

Indian economy would grow by between 7.0 per cent and 7.75 per cent in the 2016-17 fiscal year that starts on April 1.

Fiscal Deficit 
  • 2016-17 expected to be challenging from fiscal point of view; time is right for a review of medium-term fiscal framework
  • 2015-16 fiscal deficit, seen at 3.9 per cent of GDP, seems achievable
  • Credibility and optimality argue for adhering to 3.5 per cent of GDP fiscal deficit target

Inflation 
  • CPI inflation seen around 4.5 to 5 per cent in 2016-17
  • Low inflation has taken hold, confidence in price stability has improved
  • Expect RBI to meet 5 per cent inflation target by March 2017
  • Prospect of lower oil prices over medium term likely to dampen inflationary expectations

Current Account Deficit 2016/17 current account deficit seen around 1-1.5 per cent of GDP

Currency 
  • Rupee's value must be fair, avoid strengthening; fair value can be achieved through monetary relaxation
  • India needs to prepare itself for a major currency readjustment in Asia in wake of a similar adjustment in China
  • Rupee's gradual depreciation can be allowed if capital inflows are weak

Banking & Corporate Sector 
  • Estimated capital requirement for banks around 1.8 trillion rupees by 2018-19
  • Proposes to make 700 billion rupees available via budgetary allocations during current and succeeding years in banks
  • Government could sell off certain non-financial companies to infuse capital in state-run banks
  • Corporate, bank balance sheets remain stretched, affecting prospects for reviving private investments
  • Underlying stressed assets in corporate sector must be sold or rehabilitated

Taxes 
  • Tax revenue expected to be higher than budgeted levels in 2015-16
  • Proposes widening tax net from 5.5 per cent of earning individuals to more than 20 per cent
  • Favours review and phasing out of tax exemptions; easiest way to widen the tax base not to raise exemption thresholds

For more details on the Economic Survey 2015-16: Click here