President Pranab Mukherjee called for a constructive debate on simultaneous elections to the Lok Sabha and the Assemblies and funding of polls to eradicate money power.
During his customary address to the joint session of Parliament at the beginning of the budget session, Mr. Mukherjee spoke about the need to debate these issues, which are pet themes of Prime Minister Narendra Modi.
“Frequent elections put on hold development programmes, disrupt normal public life and impact essential services and burden human resource with prolonged period of election duty,” he said.
Mr. Mukherjee referred to the government’s demonetisation decision to fight black money and corruption as also the surgical strikes as bold decisions, both of which were received with thumping of desks by members.
Referring to the surgical strikes, he said the government had taken decisive steps to give a fitting reply to the repeated incursions.
On demonetisation, he said the resilience and forbearance demonstrated by people, especially the poor, in the fight against black money and corruption, were “remarkable”.
He emphasised that “financial inclusion is key to poverty alleviation. An unprecedented 26 crore plus Jan Dhan accounts have been opened for the un-banked.”
He also said that the government was taking special initiatives to develop Northeast India, including opening new road and rail routes to neighbouring countries for boosting the economic development of the region.
The government has marginally revised upwards the GDP growth for 2015–16 to 7.9% from the earlier estimate of 7.6% after factoring in the latest data on agriculture and industrial production.
“Real GDP or GDP at constant (2011–12) prices for 2015–16 and 2014–15 stands at Rs. 113.58 lakh crore and Rs. 105.23 lakh crore respectively, showing growth of 7.9% during 2015–16 and 7.2% during 2014–15,” stated CSO.
However, the figure for 2014–15 has remained unchanged at 7.2% in the second revision of the national accounts for the fiscal. Last year, CSO had estimated GDP growth rate for 2015–16 and 2014–15 at 7.6% and 7.2%, respectively.
CSO said the Gross Value Added (GVA) at constant (2011–12) basic prices grew at 7.8% in 2015–16 as against 6.9% in 2014–15.
As per the revised numbers, growth in real GVA in 2015–16 has been higher than that of 2014–15, mainly due to stronger growth in agriculture, forestry and fishing (0.8%), manufacturing (10.6%), trade, repair, hotels and restaurants.
Per capita net national income at current prices is estimated at Rs. 86,513 and Rs. 94,178 respectively for 2014–15 and 2015–16.
Per capita PFCE (private final consumption expenditure) at current prices is estimated at Rs. 57,402 and Rs. 61,571 for 2014–15 and 2015–16, respectively.
The Economic Survey recommended the Centre to incentivise good fiscal work by States to keep the overall fiscal performance on track.
Greater reliance will need to be placed on incentivising good fiscal performance, not least because States are gradually repaying their obligations to the Centre, removing its ability to impose a hard budget constraint on them.
It, however, added that incentivising good performance by the States will require the Centre to be an exemplar of sound fiscal management itself.
The average revenue deficit has been eliminated, while the average fiscal deficit was curbed to less than 3% of GSDP. The average debt to GSDP ratio has also fallen,” it said.
Survey noted that much of the improvement in financial positions was possible because of exogenous factors, most notably assistance from the Centre in the form of increased revenue transfers, the assumption of state debt, and the introduction of centrally sponsored schemes.
The Survey also highlighted that Pay Commission recommendations, and mounting payments from the UDAY bonds will lead to increase in fiscal challenges for the States.
Further, the Survey has further suggested that Redistributive Resource Transfers should be significantly linked to fiscal and governance efforts on the part of the States.
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 GDP.
The top 10 recipients are: Sikkim, Arunachal Pradesh, Mizoram, Nagaland, Manipur, Meghalaya, Tripura, Jammu and Kashmir, Himachal Pradesh and Assam.
It also recommended using a part of the RRTs or redistribute the gains from resource use, as a Universal Basic Income directly to households in relevant states which receive large RRT flows and are more reliant on natural resource revenues.
Smaller States such as Uttarakhand, Himachal Pradesh and Goa trade more, while the net exporters are the manufacturing powerhouses of Tamil Nadu, Gujarat, and Maharashtra, according to the Economic Survey.
One other finding on internal trade between States, of the first-ever estimates for interstate trade flows, is that cross-border exchanges between and within firms amount to at least 54% of GDP (in 2015).
Implying that India’s interstate trade is 1.7 times larger than its international trade of 32% of GDP.
Belying their status as agricultural and/or less developed, Haryana and Uttar Pradesh appear to be manufacturing powerhouses because of their proximity to the national capital region, according to the Survey.
India’s aggregate interstate trade (54% of GDP) is not as high as that of the U.S. (78% of GDP) or China (74% of GDP), but substantially greater than provincial trade within Canada and greater than trade between Europe Union countries.
The costs of moving (within India) are about twice as great for people as they are for goods, the Survey said. However, it said there is a potential dampener on the finding that trade in goods is high within India.
Devoting considerable attention to India’s twin-balance sheet problem, the Survey said that the agency could take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt.
India’s NPA ratio at its current level of 9.1% of the gross loans is higher than any other major emerging market (with the exception of Russia), higher even than the peak levels seen in Korea during the East Asian financial crisis.
Advocating PARA to resolve the problem of twin-balance sheets (corporates and banks) to be funded by the windfall gain to the government (from the unreturned old demonetised notes).
Economic Survey said, so far, public discussion of the bad loan problem had focused on bank capital, under the assumption that the main obstacle to resolving the twin balance sheet (TBS) concern was finding the funds needed by the public sector banks.
India has “changed utterly” over the last 13 years since the Fiscal Responsibility and Budget Management (FRBM) was enshrined in law for prudent fiscal management and therefore.
FRBM operational framework designed in 2003 “needs to be modified to reflect the India of today and even more importantly, the India of tomorrow,” according to the Economic Survey.
This suggestion assumes significance in the backdrop of the N.K. Singh panel recently submitting its report on revising the FRBM Act to finance minister Arun Jaitley.
Noting that India’s economic experience shows that the fiscal activism embraced by advanced economies giving a greater role to counter-cyclical policies and attaching less weight to curbing debt was not relevant for India.
The Survey said India’s fiscal experience has underscored the fundamental validity of the fiscal policy principles enshrined in the FRBM Act.
However, India’s experience has reaffirmed the need for rules to contain fiscal deficits because of the proclivity to spend during booms and undertake stimulus during downturns, it observed.
Even as these FRBM’s basic tenets — or the fundamental validity of the fiscal policy principles — remain valid, “… the task of the FRBM Review Committee (will be) to set out a new vision, an FRBM for the 21st century.”
The government has set a target for fiscal deficit of 3.5% of GDP for FY’17, a lower target than the 3.9% set for 2015-16 which was achieved. In value terms, the 3.5% is Rs. 5.33 lakh crore.
According to data released, fiscal deficit in the April-December (2016-17) period was 93.9% of the Budget target against 87.9% for the same period a year ago. The April-December fiscal deficit in value terms was Rs. 5.01 lakh crore.
Economic Survey acknowledged the adverse impact of demonetisation in the short term as it projected that GDP growth this year would be slowed by 0.25-0.5 percentage point as a result of the withdrawal of high-value currency notes.
“The question is: how much? The short answer is between one-quarter and half-a-percentage point relative to the baseline of about 7%,” it said.
The Reserve Bank of India had in December trimmed its projection for Gross Value Added growth for the current financial year to 7.1% from 7.6% after considering the short-term disruptions caused by demonetisation.
The survey acknowledged that GDP growth in the second half of the current fiscal would understate the overall impact because the most affected parts of the economy, informal and cash based,were either not captured in national income accounts or measured based on formal sector indicators.
