He is scheduled to present the last full budget of the current Narendra Modi-led NDA government on February 1.
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“The stock market surge in India has coincided with a deceleration in economic growth whereas USA growth has accelerated”, said the report adding that India’s corporate earnings to GDP ratio which now stands at 3.5% has declined since the 2008 financial crisis and real interest rates in India are near historic high levels.
“This will translate to about 3 million jobs annually”, the report said.
“Reflecting largely fiscal developments at the Centre, a pause in general government fiscal consolidation relative to 2016-17 can not be ruled out”, said the Survey. “They would affect inflation, the current account, the fiscal position and growth.” it said. The Survey numbers boosted the Indian equity indices – Sensex and Nifty – which touched record highs on Monday.
It also warned against setting “overly ambitious” fiscal consolidation target in the Budget on Thursday which could compromise economic growth. I think it will be a fiscally responsible budget.
He added, the reform measures undertaken in 2017-18 can be strengthened further in 2018-19. However, the additional requirement of Rs 1,701 crore was made through supplementary demands, taking the total allocation to Rs 10,701 crore for the scheme, sources added. Commenting on the Survey, HKL Magu, Chairman, Apparel Export Promotion Council (AEPC) said, “Economic Survey has predicted 7-7.5% growth in 2018-19 with exports and private investment set to rebound”.
“India’s exports continuing to be in positive territory for the fourth consecutive month in May 2017 and in double digits in April-May 2017”, it said.
“Within the context of weak economic growth, we believe Jaitley faces a hard balance in supporting growth without compromising significantly fiscal prudence (which could feed into higher inflation and potentially higher interest rates)”, Goldman Sachs said in a pre-note. However, less than expected revenue collections, especially after implementation of GST, and higher expenditure could generate fiscal pressures.
This will help India regain its position as the world’s fastest growing major economy, the government said.
The Survey said that while there are significant social and economic benefits to attacking corruption and weak governance, addressing these pathologies entails challenges.
GST, which rolled out in July 2017, has started to impact the economy positively.
“The survey captures the footprints of on the Indian territory and consequent adverse impact on agricultural yields”.
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It also suggested a “radical follow-up action” to achieve the goal of doubling farmers’ income by 2022 as it saw climate change likely to increase the burden on already stressed agricultural economy.
