Union Finance Minister Arun Jaitley tabled the Economic Survey in Parliament on January 29, 2018.
The Economic Survey 2018 is authored by Chief Economic Adviser Arvind Subramanian.
The annual survey highlights the policy priorities of the government and gives a detailed account of the state of the economy, especially in the wake of implementation of the Goods and Services Tax (GST) on July 1, 2017.
What is Economic Survey?
The Economic Survey projects the official version of the state of the economy and is generally presented in Parliament a day before the presentation of the annual Budget.
- It acts as a precursor to the budget.
- It discusses the outlook, prospects and challenges of the economy while recommending reform measures that are essential to propel the economy.
The Economic Survey, generally, recommends measures that it expects the Union Government to incorporate in the annual financial budget. These recommendations, however, serve only as a policy guide as the government is not bound to follow them.
GDP Growth Rate Estimation
- The Economic Survey 2018 has estimated that the Indian economy will grow by 7-7.5% in the financial year 2018-19.
- The Survey said, as a whole GDP growth for the financial year 2018 will be 6.75%.
- The estimation of growth is in the backdrop of the World Bank’s projected growth forecast of the gross domestic product (GDP) at 7.3 per cent for India.
- The IMF, for 2017, lowered the India’s growth rate at 6.7 per cent, however it estimated growth rate at 7.4 per cent for 2018..
- A Morgan Stanley report projected a growth rate of 6.4 for 2017 and 7.5 per cent in 2018.
10 Facts of Economic Survey 2018
1. There has been a large increase in registered direct and indirect taxpayers.
A 50 percent increase in indirect taxpayers under GST regime compared to pre-GST regime.
There has been addition (over and above trend growth) of about 1.8 million in individual income tax filers since November 2016.
2. Formal non-agricultural payroll is much greater than believed
More than 30 percent of India’s non-farm workforce (24 crore or 240 million)have some form of social security coverage (through EPFO/ESIC);
More than 50 percent non-farm workforce is currently employed in firms is under the GST net.
3. State’s prosperity is correlated with their international and inter-state trade
States that export more internationally, and trade more with other states, tend to be richer.
But the correlation is stronger between prosperity and international trade.
4. India’s firm export structure is substantially more egalitarian than in other large countries.
The top 1% of Indian firms account for only 38% of exports, unlike in other countries, where they account for a substantially greater share.
5. The clothing incentive package boosted exports of readymade garments
The relief from embedded state taxes (Rebate of State Levies; ROSL) announced in 2016 boosted exports of readymade garments (but not others) by about 16 percent.
6. Indian society exhibits strong son “Meta” Preference
Parents continue to have children until they get desired the number of sons.This kind of fertility -stopping rule leads to skewed sex ratios but in different directions; skewed in favor of males if it is the last child, but in favor of females if it not the last. Where there is no such fertility -stopping rules, ratios remain balanced regardless of whether the child is the last or not.
7. There is substantial avoidable litigation in the tax arena which government action could reduce
The tax department has contested several tax disputes in courts, though the success rate in litigation is low and declining (well below 30 percent)
Only 0.2 percent of cases accounted for 56 percent of the value at stake
About 66 percent of pending cases (each less than Rs. 10 Lakhs) accounted for only 1.8 percent of the value at stake.
8. To reignite growth, raising investment is more than raising saving
Cross country experience shows that growth in savings does not bring economic growth whereas growth in investment does.
9. Direct tax collections by Indian states and local governments are significantly lower than those of their counterparts in other federal countries like Brazil and Germany
This share is low relative to the direct taxation powers they actually have.
10. The footprints of climate change are evident and extreme weather adversely impacts agricultural yields.
The impact of weather is felt only with extreme temperature increase and rainfall deficiencies. Extreme temperature increases and deficiency in rainfall have been captured on the Indian map and the geographical changes in agricultural yields are brought out from such data.
The impact was found to be twice as large in non-irrigated areas as in irrigated ones.
Other findings of the Economic Survey:
- There were 9.8 million unique GST registrants, an increase by 3.4 million compared to the pre-GST regime (July 2017). West Bengal has seen the largest increase in the number of tax registrants.
- Maharashtra, Gujarat, Karnataka, Tamil Nadu and Telangana account for 70% of India’s exports.
- The growing migration of men from rural to the urban area has led to ‘feminisation’ of the agriculture sector.
- There has been a substantial rise in the number of women in multiple roles as cultivators, entrepreneurs, and labourers.
- The mechanisation is growing in the farm sector.
- The share of renewable energy sources has lowered in the last 10 years. Renewable energy sources generate only 18% of the total installed capacity of electricity in the country.
- The Survey pointed four factors for rising pollution in Delhi-NCR (National Capital Region) — crop residue and biomass burning, vehicular emissions, redistributed road dust from industries and power plants, and winter temperature inversion due to lack of humidity and absence of wind.
- Pending cases in courts are affecting the economy. Both the government and the courts should come together to find a solution to address the large pendency of cases.
- The preference for son is resulting in a skewed sex ratio. Other states should follow the example of the north-eastern States when it comes to gender equality.
- The quality of hygiene and sanitation had a significant impact on improving the health outcomes. The Swachh Bharat Mission has increased the sanitation coverage in rural India from 39% in 2014 to 76% in January 2018.
- India needs to become a net producer of knowledge as opposed to being a net consumer of knowledge.