The Economic Survey for the current financial year (2015-16), which was tabled in the parliament earlier today, showed that government was optimistic about containing the fiscal deficit target at 3.9 percent in the current fiscal. However, the survey said achieving the earlier target to curtail the deficit further to 3.5 percent for the next fiscal year (2016-17) will be challenging owing to additional outgo towards 7th Pay Commission and a slowing global economy.
Ahead of the Union Budget on Monday, the survey termed external environment as challenging but projected a 7-7.5 percent GDP growth rate in the next fiscal which could accelerate to 8 percent in a couple of year. For the current fiscal, the government estimates the GDP to expand by 7.6 percent amid sluggish economic growth and subdued exports.
"The coming year is expected to be a challenging one from the fiscal point of view. The chances of India's growth rate in 2016-17 increasing significantly beyond 2015-16 levels are not very high due to the likelihood of persistence of global slowdown," said the Economic Survey for 2015-16 tabled in Parliament by Finance Minister Arun Jaitley today.
The Economic Survey also highlighted on other major aspects of economy and outlook for the same.
PSU bank recapitalisation: In order to strengthen public sector banks (PSBs), government could sell off some PSUs and use the proceeds to make additional investments in state-owned lenders, the Economic Survey said. The government could sell off assets that it no longer wants to hold, such as certain nonfinancial companies, and use the proceeds to make additional investments in the PSBs, said the economic report card of 2015-16.
Last year, the government had announced a revamp plan 'Indradhanush' to infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise a further Rs 1.1 lakh crore from the markets to meet their capital requirements in line with global banking risk norms Basel III. As per the blueprint, PSU banks will get Rs 25,000 crore this fiscal and also in the next fiscal. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19. Referring to the problems in twin balance sheets (TBS) - PSBs and corporate - the Survey said it is one of the most critical short-term challenges confronting the Indian economy.
On delay in GST rollout: Expressing disappointment over delay in the passage of GST bill, the Economic Survey today said the roll out of Goods and Services Tax will usher in an "unprecedented reform" in modern global tax history. The government had originally planned to roll out GST from April 1, 2016. According to the survey, the GST has the potential to push India's GDP by one to two per cent. GST will subsume excise, service tax, VAT and other state levies, will bring in a single-rate indirect tax in the country and is estimated to affect 2-2.5 million excise and service tax payers, the survey said.
Job creation: India's most pressing labour market challenge going forward will be to generate large number of "good jobs" -- jobs that are safe and also pay well, the Economic Survey said. In order to take advantage of the democratic dividend and meet growing aspirations of those entering the workforce, the economy needs jobs that are good, safe, productive and well paying," as per the 2015-16 report card of the state of the economy tabled by Finance Minister Arun Jaitley in Parliament today.
The survey noted that there has been an increase in use of contract labour. The number of contract workers has increased from 12 percent of all registered manufacturing workers in 1999 to over 25 per cent 2010 as firms' just wanted to boost their production without facing any kind of labour unrest. Around 10.5 million new jobs were created between 1989 and 2010, only 3.7 million - or about 35 per cent - were in the formal sector.
Start-ups' exit valuation still low: India may boast of being home to around 19,400 technology-enabled startups, but exit valuation for the investors looking to cash in on the initial funding still remains low, says an official survey. "It is important that startups too see 'exit', which could take the form of these companies being listed, allowing the original private investors to cash in on the initial investment and plough it back into other similar ventures. Exit valuations in India are still low," the survey said. It added exit valuations are expected to increase as the impact of new Sebi policies on listings comes into effect and
as equity markets, in general, revive from current low valuations, caused by a sense of gloom in the global economy. Indian startups have raised $3.5 billion in funding in the first half of 2015 and the number of active investors in India has increased from 220 in 2014 to 490 in 2015, the survey noted.
Push for tax-GDP ratio: India needs to increase its tax-GDP ratio, and spend more on health and education, the Economic Survey 2015-16 said. Country's tax to GDP ratio is at 16.6 percent and is well below the emerging market economy(EME)and OECD averages of about 21 percent and 34 percent respectively. Pointing out that in India, roughly 5.5 percent of earning individuals are in the tax net, Jaitley said the pre-Budget statistic gives an idea of the gap that the country needs to cover to become a full tax-paying democracy.
With Agency inputs