Economic Survey: India will remain world’s fastest growing major economy
India is poised to slow down, the government signalled on Friday as its annual report card pegged GDP growth for 2016-17 at 7 to 7.75% — a downtick from the 7.6% estimated for this year.
Despite the slowdown, the country will remain the world’s fastest growing major economy and a “haven of stability” in a wobbly global economy, the pre-budget Economic Survey for 2015-16 tabled in Parliament on Friday said.
The survey spoke of a “Chakravyuha challenge” in easing investments and dismantling exit barriers, making a strong pitch for immediate reform measures such as the Goods and Services tax (GST) and labour reforms. This will help bring more people under the tax net and raise property tax rates to check speculation in India’s realty market marred by opaque deals.
Another key concern is job creation for millions of Indians who will join the work-force every year over the next decade, the survey warned, adding India needs to “create enough ‘good jobs’ — jobs that are safe and pay well, and encourage firms and workers to improve skills and productivity”.
A ballooning wage and pension bill for civilian and defence staff could also bite away a larger chunk of the government’s resource cake, the survey anchored by chief economic adviser Arvind Subramanian indicated.
Finance minister Arun Jaitley, who will present the budget for 2016-17 on Monday, may have to scour for that extra rupee to make funds available for one-off expenses such as those relating to the one-rank-one-pension (OROP) scheme and the expected 7th Pay Commission payouts.
The 23.5% average hike in the central government employees’ salaries, as recommended by the pay panel, could push up the government’s wage bill by an estimated Rs 1.02 lakh crore in 2016-17.
Jaitley would like to contain the fiscal deficit — a measure of how much the government borrows to fund its expenses — within manageable limits.
India has budgeted to control fiscal deficit to 3.9% of GDP in 2015-16, bring it down to 3.5% next year and further reduce it to 3% of GDP the year after.
While a fiscal deficit of 3.9% this year was “achievable”, the coming year is “expected to be challenging one from the fiscal point of view”.
“Implementation of the Pay Commission recommendations and the OROP scheme will put additional burden on expenditure,” it said.
India though, is in a good position to reap the advantages of lower global oil prices, low inflation and a normal monsoon next year. Inflation is expected to stay in a 4.5-5% range.
Parliamentary logjam over critical reforms such as GST was coming in the way of India’s growth ambitions, the survey further noted, placing the onus firmly on lawmakers to get key legislations moving to turn India into a favoured investment destination.
“’The GST awaits a Constitutional amendment requiring broad political consensus,” it said.
As for jobs, the Economic Survey said that a policy push was required in the formal sector to absorb the armies of young people joining the work force annually.
“The challenge of creating good jobs could be seen as a challenge of creating more formal sector jobs, which also guarantee workers protection,” it said.
Source : Economic Times