Economic Survey 2016-17 : Important Questions & Answers

ANSWER: 6.75-7.25 percent

Explanation:
Survey was prepared by CEA in Finance Ministry, Arvind Subramaniam. The survey projects growth rate of 6.75 to 7.25 percent in the fiscal 2017-2018.

This marks the transitional adverse impact of demonetisation on on GDP growth.

Highlights of Economic Survey 2016-2017

Growth Forecast:

Gross domestic product (GDP) growth in 2016-17 pegged at 6.5%, down from 7.6% in last fiscal 2015-16.

Economic growth to rebound to 6.75 to 7.5% in 2017-18.

Farm sector to grow at 4.1% in 2016-17, up from 1.2% in 2015-16.

Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17 from 7.4% in 2015-16.

Service sector is estimated to grow at 8.9% in 2016-17 GST, other structural reforms should take the growth rate trend to 8-10%.

Demonetisation:

The adverse impact of demonetisation on GDP growth will be transitional.

It will affect growth rate by 0.25-0.5%, but to have long-term benefits

It may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.

Remonetisation will ensure that the cash squeeze is eliminated by April 2017.

Universal Basic Income (UBI):

Advocates the concept of UBI as an alternative to the various social welfare schemes in an effort to reduce poverty.

It will be alternative to plethora of state subsidies for poverty alleviation. UBI would cost between 4 and 5% of GDP

Taxation:

Prescribes cut in individual Income Tax rates, real estate stamp duties.

IT net could be widened gradually by encompassing all high income earners.

Time table for cutting corporate tax should be accelerated.

Tax administration could be improved to reduce discretion and improve accountability.

Goods and Services Tax (GST):

Fiscal gains from GST will take time to realise.

Fiscal Deficit:

Implementation of muted tax receipts, wage hike to put pressure on fiscal deficit in 2017-18.

For fiscal health of the economy fiscal prudence for both centre and states is needed.

Fiscal windfall from low oil prices to disappear in 2017-18.

Inflation:

The average consumer price index (CPI) inflation rate declined to 4.9% in 2015-16 from 5.9% in 2014-15.

CPI-based core inflation remained sticky around 5% in the 2016-17.

Oil prices, seen rising by one-sixth in 2017-18 over the previous fiscal 2016-17 prices which could dampen India’s economic growth.

Monetary Policy:

Monetary easing headroom may be capped due to sharp rise in prices in 2017-18.

Market interest rates seen lower in 2017-18 due to demonetisation.

Government Debt to GDP ratio:

It was 68.5% in 2016, down from 69.1% in 2015.

Banking:

Suggests setting up public sector asset rehabilitation agency (PSARA) to take charge of large bad loans in banks.

With government backing, PSAR can overcome coordination and political issues on bad loans.

ANSWER: 4^th

Explanation:
India has attained the fourth position globally in installed wind power capacity.

It is after China, US and Germany as a result of various steps in the right direction, the Economic Survey said.

With the legal framework in place for the International Solar Alliance (ISA) by Prime Minister Narendra Modi and launched during the UN climate summit in Paris, ISA will be a "major" international body headquartered in India.

It said that currently, India's renewable energy sector is undergoing transformation with a target of 175 GW of renewable energy capacity to be reached by 2022.

In order to achieve the target, the major programmes on implementation of :

• Solar Park,
• Solar Defence Scheme,
• Solar scheme for Central Public Sector Undertakings,
• Solar photovoltaic (SPV) power plants on canal bank and canal tops, solar pump, solar rooftop among others have been launched.

A capacity addition of 14.30 GW of renewable energy has been reported during the last two and half years under Grid Connected Renewable Power.

This includes 5.8 GW from Solar Power, 7.04 GW from Wind Power, 0.53 GW from Small Hydro Power and 0.93 GW from Bio-power.

On October 31, 2016, India achieved 46.3 GW grid-interactive power capacity, 7.5 GW of grid-connected power generation capacity in renewable energy.

It also has small hydro power capacity of 4.3 GW.

Besides this, 92,305 solar pumps were installed and Rs 38,000 crore worth of Green Energy Corridor is being set up to ensure evacuation of renewable energy.

With India's initiative, ISA envisaged as a coalition of solar resource-rich countries to address their special energy needs, will provide a platform to collaborate.

It will focus on addressing the identified gaps through a common and agreed approach.

ISA: Know More

24 countries have signed the Framework Agreement of ISA after it was opened for signature on November 15, 2016.

ISA is expected to become inter-governmental treaty-based organization.

It will be registered under Article 102 of the UN charter after 15 countries ratify the Agreement.

With legal framework in place, ISA will be a major international body headquartered in India

ANSWER: Public Sector Assets Reconstruction Agency

Explanation:
To tackle with the problems of increasing Non-Performing Assets (NPAs) of the banking system and declining credit and investment, the Economic Survey 2016-17 on recommended a centralised Public Sector Asset Rehabilitation Agency (PARA).

PARA will aim to look at the largest, most difficult cases, and make politically tough decisions to reduce debt.

As per the Survey, gross NPAs have climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016.

At this level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia.

The consequent squeeze of banks has led them to slow credit growth to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades.

As this has occurred, growth in private and overall investment has turned negative.

A decisive resolution is urgently needed before the ‘Twin Balance Sheet’ problem becomes a serious drag on growth.

Public discussion of the bad loan problem has focused on bank capital.

A far more problematic issue is that of finding a way to resolve the bad debts.

“Some debt repayment problems have been caused by diversion of funds.

But the vast majority has been caused by unexpected changes in the economic environment after the Global Financial Crisis.

This caused timetables, exchange rates, and growth rate assumptions to go seriously wrong.

This concentration creates a challenge since large cases are difficult to resolve, but also an opportunity.

The large debtors have many creditors, with different interests.

A professionally-run central agency with the government backing could overcome the coordination and political issues that have impeded progress so far.

ANSWER: Normal

Explanation:
The Indian economy will recover in 2017-18 after the cash supply is replenished post demonetisation.

Following the demonetisation of Rs. 1,000 and old Rs. 500 notes, country’s gross domestic product (GDP) is expected to grow in the range of 6.75-7.5 per cent, the Economic Survey 2016-17 tabled on 31st Jan 2017 said.

Demonetisation led to temporary slowdown in the GDP growth.

Economy will reap benefits in terms of increased digitalisation, greater tax compliance and a reduction in real estate prices.

This could increase long-run tax revenue collections and GDP growth.

The Survey, however, said the cash squeeze will have significant implications for the GDP, reducing 2016-17 growth by ¼ to ½ percentage points compared to the baseline of 7 per cent.

The GDP may not be able to gauge the impact of demonetisation on the informal sector.

The Survey illustrated a sector-wise impact of demonetisation.

It stated demonetisation led to job losses, decline in farm incomes and social disruption, especially in cash intensive sectors.

According to the Survey, the weighted average price of real estate in eight major cities, which was already on a declining trend, fell further after demonetisation was announced on November 8.

The Survey suggested a few measures to maximise long term benefits and minimise short-term costs due to demonetisation:

One such is fast remonetisation and especially, free convertibility of cash to deposits including through early elimination of withdrawal limits.

This would reduce the GDP growth deceleration and cash hoarding.

Land and real estate should be brought under the Goods and Services Tax following demonetisation.

Demonetisation: Know More

On 8 November 2016, the Government of India announced the demonetisation.

This was of all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes of the Mahatma Gandhi Series.

The government claimed that the action would curtail the shadow economy.

It would also crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.

ANSWER: Big Data

Explanation:
For the first time, the Economic Survey has used Big Data Analysis to shed new light on the flow of goods and people within India.

Survey produces first estimate of the flow of goods across states within India, based on analyzing transactions level data provided by the Goods and Services Tax Network (GSTN),

Survey furnishes exciting new evidence on the flows of migrants within India.

This is based on detailed origin-destination passenger data provided by the Ministry of Railways and on a new methodology for analysing the Census data.

This year’s Economic Survey does not carry the usual statistical tables on the economy’s performance.

The survey seems to have compensated this by the use of Big Data and intensive data-mining of multiple datasets.

The survey has used individual tax filings administered by the Goods and Service Tax Network to estimate state-level (both inter and intra) trade.

Railway station-wise unreserved passenger traffic data provided by the Indian Railways has been used to arrive at estimates of work-related migration.

Satellite imagery has been used to calculate built-up area and estimate potential property tax collections (and hence losses being incurred).

Machine generated large scale data sets have been used more intensively. NSSO statistics has been used to generate insights on spatial concentration of poverty and welfare beneficiaries.

Official statistical machinery has moved past surveys to include administrative data.

The new approach towards using diverse datasets is definitely an important first step towards better decision-making.

Marrying satellite imagery about properties data with something like income tax data for India’s top 50 cities and house-size census data can generate rich insights about Indian cities.

ANSWER: Females

Explanation:
New estimates of labour migration in India have revealed that inter-state labor mobility is significantly higher than previous estimates.

This was stated in the Economic Survey 2016-17.

The study based on the analyses of new data sources and new methodologies also shows that the migration is accelerating and was particularly pronounced for females.

The data sources used for the study are the 2011 Census and railway passenger traffic flows of the Ministry of Railways and new methodologies including the Cohort-based Migration Metric (CMM) .

The new Cohort-based Migration Metric(CMM) shows that inter-state labor mobility averaged 5-6.5 million people between 2001 and 2011.

This is yielding an inter-state migrant population of about 60 million and an inter-district migration as high as 80 million.

The first-ever estimates of internal work-related migration using railways data for the period 2011-2016 indicate an annual average flow of close to 9 million migrant people between the states.

Both these estimates are significantly greater than the annual average flow of about 4 million suggested by successive Censuses and higher than previously estimated by any study.

Migration for work and education is also accelerating.

There is also a doubling of the stock of inter-state out migrants to nearly 12 million in the 20-29year old cohort alone.

Higher growth and a multitude of economic opportunities could therefore have been the catalyst for such an acceleration of migration.

Language does not seem to be a demonstrable barrier to the flow of people.

Fourth, the patterns of flows of migrants found in this study are broadly consistent with what is expected - less affluent states see more out migration migrating out while the most affluent states are the largest recipients of migrants.

Policy actions to sustain and maximize the benefits of migration include:

• Ensuring portability of food security benefits,
• Providing healthcare and a basic social security framework for migrants - potentially through an inter-state self-registration process.

Redistributive Resource Transfer and the Economic Survey

Economic Survey also calculates Redistributive Resource Transfers’ (RRT) from the Centre (between 1994 and 2015) and value of natural resources for Indian States (over 1980 and 2014).

It correlates these with several economic outcomes and an index of governance.

Redistributive Resource Transfer or RRT to a state (from the Centre) is defined as gross devolution to the state adjusted for the respective state’s share in aggregate Gross Domestic Product(GDP).

The top 10 recipients are:

• Sikkim,
• Arunachal Pradesh,
• Mizoram,
• Nagaland,
• Manipur,
• Meghalaya,
• Tripura,
• Jammu and Kashmir
• Himachal Pradesh
• Assam.

ANSWER: Both of the above

Explanation:
The Economic Survey 2016-17 tabled in Parliament today by the Union Finance Minister Shri Arun Jaitley has advocated the concept of Universal Basic Income (UBI).

This is as an alternative to the various social welfare schemes in an effort to reduce poverty.

The survey juxtaposes the benefits and costs of the UBI scheme.

The Survey says the UBI, based on the principles of universality, unconditionality and agency, is a conceptually appealing idea.

Economic Survey points out that the districts where the needs are greatest are precisely the ones where State capacity is the weakest.

This suggests that a more efficient way to help the poor would be to provide them resources directly, through a UBI.

Exploring the principles and prerequisites for successful implementation of UBI, the Survey points out that the two prerequisites for a successful UBI are:

a. functional JAM (Jan Dhan, Aadhar and Mobile) system as it ensures that the cash transfer goes directly into the account of a beneficiary

b. Centre-State negotiations on cost sharing for the programme.

The Survey says that a UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP.

This is assuming that those in the top 25 percent income bracket do not participate.

On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP.