Economic Survey 2018: FY18 GDP at 6.75%; GST, bankruptcy code growth drivers

Reforms of the past year to allow real GDP growth to reach 7.5% in 2018-19, regain fastest growing major economy tag for India

The Economic Survey 2017-18, tabled in Parliament on Monday, forecasts gross domestic product growth for 2018-19 at 7-7.5 per cent, compared with a forecast of 6.75 per cent in the current fiscal year.

“A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 percent this fiscal and will rise to 7.0 to 7.5 per cent in 2018-19, thereby re-instating India as the world‘s fastest growing major economy,” an official statement said, after the tabling of the survey, adding that “the reform measures undertaken in 2017-18 can be strengthened further in 2018-19.

The survey said that due to the launch of ‘transformational’ Goods and Services Tax (GST), resolution of the long-festering Twin Balance Sheet (TBS) problem by sending the major stressed companies for resolution under the new Indian Bankruptcy Code, implementing a major recapitalization package to strengthen the public sector banks, further liberalisation of FDI and the export uplift from the global recovery, the economy began to accelerate in the second half of the year.

“Agriculture, industry and services sectors are expected to grow at the rate of 2.1 per cent, 4.4 per cent, and 8.3 per cent respectively in 2017-18. The survey adds that after remaining in negative territory for a couple of years, growth of exports rebounded into positive one during 2016-17 and expected to grow faster in 2017-18. However, due to higher expected increase in imports, net exports of goods and services are slated to decline in 2017-18,” it said.

In a highlighted box titled “Ten New Facts on the Indian Economy”, the survey stated that there was a large increase in registered direct and indirect tax payers due to demonetization and GST respectively, and that formal non-agricultural payroll was much greater than earlier anticipated.

In what it claims to be a first, the survey also released data on international trade of states and said that Maharashtra, Gujarat, Karnataka, Tamil Nadu & Telangana account for 70 per cent of India’s exports. It also said that Indian parents have a proclivity to have children unless they have the desired number of sons, and that direct tax collections by states and local governments are much lower than comparable countries.