All not hunky-dory on the eco front

7.5% growth difficult, eco activity slow across board, says Survey tabled in Parliament

Across-the-board deceleration in economic activity has made it difficult to get to the 7.5 per cent GDP growth as projected earlier for the current fiscal, Economic Survey said on Friday as it called for more interest rate cuts and use of all policy tools to revive momentum.

Flagging uncertain fiscal outlook for 2017-18, it listed a number of challenges facing the economy — appreciation of the rupee, farm loan waivers, rising stress on balance sheets in power as well as telecom and transition issues arising from implementing the Goods and Services Tax (GST). Tabled in Parliament, the Survey — which is the second part of the one brought out in January-end and carries the mid-year review, warned of fiscal slippages as “a series of deflationary impulses are weighing on an economy yet to gather its full momentum”.

One among them is farm loan wavier, which could cut demand in the economy by up to 0.7 per cent of GDP.

Farm loan waivers, which total `1.25 lakh crore for states that have already announced such measures, could reach `2.7 lakh crore if all states were to implement it.

Such waivers would be deflationary and impact demand by up to `1.14 lakh crore. “There has been an across-the-board deceleration” in real economic activity since the first and second quarter of last year, said Chief Economic Adviser Arvind Subramanian, the author of the Survey. “It is less likely than before that we will reach the upper end” of the 6.75 to 7.5 per cent growth forecast for the fiscal year to March 2018, he said. India’s economy grew by 7.1 per cent in the 2016-17 fiscal. Growth slowed to 6.1 per cent in the March quarter, its lowest in more than two years.

He listed GST receipts, growth outlook, receipts from telecom spectrum and 7th Pay Commission outgo on government employees salary as downside risks.

Upside potential included compliance benefits from the GST and higher denomination currency demonetisation, which has added 5.4 lakh new tax payers and reduced cash by 20 per cent. He said structural decline in inflation and inflation outlook create scope for lower interest rates.