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Economic Survey 2016-Key Highlights

... Ashish Bharati

Economic Survey gives a review of the economy and  also gives a broad idea on the macro-economic data that are likely to the budget decisions. The survey, a flagship annual document of the Ministry of Finance, summarises the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term.

  • Economic Survey projects 7.6 per cent economic growth rate in 2015-16. Projects India to grow 8% in the next couple of years. However, Upcoming budget and economic policy will have to contend with an unusually challenging and weak external environment. Services continue to be key driver; expected to grow by  9.2% in 2015-16
  • 2015/16 fiscal deficit seen at 3.9 percent of GDP.
  • CPI inflation seen around 4.5 to 5% in 2016/17 and Low inflation has taken hold, confidence in price stability has improved. Expect RBI to meet 5 percent inflation target by March 2017. Prospect of lower oil prices over medium term likely to dampen inflationary expectations. Increase in wages recommended by the 7th Pay Commission not likely to destabilise prices, will have little impact on inflation
  • 2016/17 current account deficit seen around 1-1.5% of GDP
  • Rupee's value must be fair, avoiding strengthening; fair value can be achieved through monetary relaxation in wake of a similar adjustment in China.
  • Survey Proposes widening tax net from 5.5% of earning individuals to more than 20%. Tax revenue expected to be higher than budgeted levels in FY15/16. Easiest way to widen the tax base would be not to raise exemption thresholds. Survey  favours review and phasing out of tax exemptions
  • Corporate, bank balance sheets remain stretched, affecting prospects for reviving private investments. Underlying stressed assets in corporate sector must be sold or rehabilitated
  • Govt could sell off certain non-financial companies to infuse capital in state-run banks. Govt proposes to make available 700 bn rupees via budgetary allocations during current, succeeding years in banks
  • Indian Equity market relatively resilient compared to other major emerging market economies
  • Foreign exchange reserves have risen to US $ 349.6 (Jan-2016)

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