The Chief Economic Advisor to Government of India (CEA) Arvind Subramanian came out with the annual economic survey on Monday the first day of the budget session of parliament. CEA obviously tried to paint a very rosy picture of the situation and to be fair to him there are many points on which he is right but serious challenges still remain on many fronts and they are worrisome.
Tax collections are growing. Number of people filing tax returns has been steadily growing and Goods and Services Tax (GST) collections is growing at about 12% and markets including Mumbai Sensex figures are at an all-time high. But the condition of agriculture in almost every state in India remains a huge challenge and so does the area of social and economic disparity.
The economy should grow between 7 per cent and 7.5 per cent in the next fiscal year starting April 1, 2018, with exports and private investment set to rebound, the Economic Survey says. Finance Minister Arun Jaitley tabled the survey, the annual report card of the country's financial health, in Parliament on Monday as the Budget session began.
The Economic Survey sees GDP growth at 6.75 per cent in the current fiscal year, ending March 31, 2018. It says a series of major reforms undertaken over the past year will allow real GDP growth to rise to between 7.0 per cent and 7.5 per cent in 2018-19, thereby reinstating India as the world's fastest growing major economy.
Stock markets remained strong in afternoon trade with Sensex and Nifty rising to record highs. The Sensex was up over 350 points while Nifty traded above 11,150.
Arvind Subramanian, who has prepared the Economic Survey, said in a tweet that growth is reviving after temporary decoupling. There are robust and broad-based signs of revival in economic activity, he added.
The economic survey says the launch of the Goods and Services Tax (GST), resolution of long-festering bad loans under the Bankruptcy Code, the implementation of a bank recapitalisation package for public sector banks and further liberalisation of the foreign direct investment regime will lift GDP growth, which began to accelerate from the second half of the current fiscal year.
The International Monetary Fund (IMF) projects the Indian economy to grow at 7.4 per cent in 2018, which will make it the fastest growing country among emerging economies. The IMF has also projected a growth rate of 7.8 per cent for India in 2019.
The economic survey has flagged risks from rising oil prices. "Some of the factors could have dampening effect on GDP growth in the coming year viz. the possibility of an increase in crude oil prices in the international market," it says.
It has also said that concerns have been expressed about growing protectionist tendencies in some countries but it remains to be seen as to how the situation unfolds.
The biggest problem of course has been generation of employment. The term that's famous by now of "jobless growth" seems to be the challenge that the government has to face. At the root of this issue is the lack of sufficient private investment. Private investment is just not keeping up to the mark and that perhaps is due to the fact that investor confidence is still down. This has to be worked on by the government and policy makers.
So while there are some good indications that the government is now talking of in the run upto this year's budget, there are also big challenges that the CEA also referred to in his speech. Now it remains to be seen how these are tackled by the government in the 15 months before the next big general elections.
