Economic Survey upbeat, predicts 7.5% growth

compromise economic growth. The pre- Budget survey suggested following a modest consolidation that credibly signals a return to the path of gradual but steady fiscal deficit reductions.

As per the roadmap, the government aims to contain the fiscal deficit for 2017- 18 at 3.2 per cent of the GDP, and further tighten it to 3 per cent in 2018- 19.

The Survey said that as far as demonetisation is concerned, the cash- to- GDP ratio has stabilised, suggesting a return to equilibrium.

“The stabilisation also permits estimation of the impact of demonetisation: about ` 2.8 lakh crore less cash ( 1.8 per cent of GDP) and about ` 3.8 lakh crore less high denomination notes ( 2.5 per cent of GDP),” it said.

The Economic Survey said that recovery is taking hold as reflected by a variety of indicators, including industrial production data, gross capital formation and exports.

However, it added that the twin engines ( exports and investment) which propelled the economy’s take- off in the mid- 2000s are continuing to run below take- off speed.

The Survey said that the country’s GDP decoupled from the global economy in the first half of 2017- 18 and it slowed down due to demonetisation, teething problems with GST implementation and high interest rates. It also claimed a 50 per cent increase in indirect taxpayer base post GST, adding that the note ban led to wider taxpayers’ base and more household savings.

It said that many of the new tax filers after demonetisation and GST reform were in the slab of ` 2.5 lakh annual income who don’t need to pay any tax. But, the Survey was hopeful that as income growth over time pushes many of the new tax filers over the threshold, revenue dividends should increase robustly.

However, it said that due to various measures taken by the government to curb black money generation, there was ` 65,000 to ` 90,000 crore increase in income tax collection in the past two years.

The Survey said that while there are significant social and economic benefits to attacking corruption and weak governance, addressing these pathologies entails challenges.

“In the case of the GST and demonetisation, informal cash- intensive sectors of the economy were impacted,” it said.

The Survey said that in the case of spectrum, coal, and renewables, auctions may have led to a winners’ curse, whereby firms overbid for assets, leading to adverse consequences in each of the sectors; but they created transparency and avoided rent seeking with enormous benefits, actual and perceptional.

It warned that climate change could pare back annual agricultural incomes in India by 15 to 25 per cent with unirrigated lands being harder hit by rising temperatures and decline in rainfall.