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India's economy should grow between 7 per cent and 7.5 per cent in 2018/19 (April-March) with exports and private investment set to rebound, the Economic Survey 2018, which was presented on Monday, said.
The survey, which sets the stage for Finance Minister Arun Jaitley's annual Budget on Thursday, forecast that economic management will be challenging in the coming year.
The survey was prepared by the finance ministry's Chief Economic Advisor Arvind Subramanian, who estimates that gross domestic product will have grown 6.75 per cent in the current fiscal year ending in March.Highlights of the Economic Survey, 2017-18, tabled in Parliament on Monday:
i) Economic growth pegged at 7-7.5 per cent for FY'19.
ii) The growth to be higher at 6.75 per cent in FY'18 than advance estimates of 6.5 per cent.
iii) CPI inflation averaged 3.3 per cent during April-December, the lowest in the past six years.
iv) Fifty per cent increase in the number of indirect taxpayers due to Goods and Services Tax (GST).
v) During the first eight months of 2017-18, tax collections are reasonably on track; and the robust progress in disinvestment compensates to a great extent for the sluggish pace in non-tax revenue.
vi) Fiscal deficit overshot target by 12 per cent till November. Likely to normalise as the year progresses.
vii) Weighted average collection rate (incidence) of GST is about 15.6 per cent. As such, the single tax rate that would preserve revenue neutrality is between 15 to 16 per cent.
viii) Tax departments have gone in for contesting several tax disputes but also with a low success rate, which is below 30 per cent.
ix) Largest firms account for much smaller exports than in other comparable countries. Top one per cent of Indian firms account only for 38 per cent of exports unlike in other countries where they account for substantially greater share – (72, 68, 67 and 55 per cent in Brazil, Germany, Mexico, and USA, respectively).
x) Five States -- Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Telangana -- account for 70 per cent of India's exports.
xi) Indian society exhibits a strong desire for a male child. Most parents continue to have children until they get the desired number of sons.
xii) There is feminisation of agriculture sector with males migrating to urban areas.
xi) Demonetisation helped in increasing share of financial savings.
xii) Formal sector in the economy is substantially greater than currently believed. Formality defined in terms of social security provision yields an estimate of formal sector payroll of about 31 per cent of the non-agricultural work force; formality defined in terms of being part of the GST net suggests a formal sector payroll share of 53 per cent.
xiii) Government and the courts need to both work together for large-scale reforms and incremental improvements to combat a problem that is taking a large toll on the economy.
* 2017/18 industry growth seen at 4.4 per cent
* 2017/18 farm sector growth seen at 2.1 per cent
* 2017/18 services sector growth seen at 8.3 per cent
* Economic management will be challenging in the coming year
* Biggest source of upside to growth to be from exports
* Cyclical conditions may lead to lower tax and non-tax revenues in 2017/18
* Private investment poised to rebound
* Target for fiscal consolidation, especially in a pre-election year, can carry a high risk of credibility
* Current account deficit for 2017/18 expected to average 1.5-2 per cent of GDP
* Pause in general government fiscal consolidation cannot be ruled out in 2017/18
* Suggests modest (fiscal) consolidation that signals a return to the path of gradual but steady deficit reductions
Inflation, policy rates
* Persistently high oil prices remain a key risk, to affect inflation
* If inflation doesn't deviate from current levels, policy rates can be expected to remain stable
* Average CPI inflation seen at 3.7 per cent in 2017/18
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