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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Key Highlights of the Economic Survey 2016-17 (VOL-2)
Sep 04, 2017

[GS Paper III: (Indian Economy and Issues Relating to Planning, Mobilisation of Resources, Growth, Development and Employment)]

Review of Economic Developments in 2016-17

  • Real economy grew by 7.1% in 2016-17 compared with 8% the previous year. This performance was higher than the range predicted in the Economic Survey (Vol-1) in February 2017.
  • Annual inflation averaged 5.9% in 2014-15 and has since declined to 4.5% in FY 2017. More dramatic have been developments during 2016-17- inflation declined sharply from 6.1% in July 2016 to 1.5% in June 2017.
  • Unlike nominal GDP, real GDP accounts for changes in price level and provide a more accurate figure of economic growth.

Fiscal Developments 

  • Strong growth in tax revenue, sustenance of the pace of capital spending and a consolidation of non-salary/pension revenue expenditure helped contain the fiscal deficit to 3.5% of GDP in 2016-17.
  • The fiscal deficit is expected to decline to 3.2% of GDP in 2017-18 and the fiscal deficit target of 3% of GDP under the FRBM framework is projected to be achieved in 2018-19.

Monetary Management and Financial Intermediation

  • The Reserve Bank of India cut the policy rate by 50 basis points during 2016-17. However, it shifted its monetary policy stance from accommodative to neutral in February 2017. 
  • Credit off-take from banks continued to decelerate.
  • Sluggish growth and increasing indebtedness in some sectors of the economy have impacted the asset quality of banks and this is a cause for concern.
  • Financial inclusion is proceeding swiftly under the Pradhan Mantri Jan Dhan Yojana (PMJDY) and zero balance accounts under it have declined consistently. 

Prices and Inflation 

  • Significant moderation in CPI headline inflation during the last three years. 
  • Convergence between CPI and WPI inflation in the last few months.
  • Both rural and urban inflation have declined in 2016-17 and the gap between rural and urban inflation has narrowed down in recent months.

Climate Change, Sustainable Development and Energy

  • Social cost analysis of coal and renewables based power indicates higher social costs for renewables. 
  • Storage costs and stranding of assets based on coal based power are major costs associated with the renewables based power. 
  • Given that the first goal for India is to provide 100% energy access to its population and bridge the development deficit gap, all energy sources need to be tapped.
  • A number of initiatives have been taken in the Indian financial sector to boost renewable energy:

→ In the renewable energy segment, as per the notification of the RBI in May 2016, bank loans of up to Rs.15 crore for solar-based power generators, biomass-based power generators, wind mills, micro-hydel plants, etc. will be considered part of Priority Sector Lending. 
→ The External Commercial Borrowing (ECB) norms have been further liberalized so that green projects can tap this window for raising finance across the borders. 
→ The Securities and Exchange Board of India (SEBI) has, in May 2017, put in place the framework for issuance of green bonds.

Green bonds are innovative financial instruments where the proceeds are invested exclusively in green projects that generate climate or other environmental benefits, example in renewable energy, clean transportation and clean water. Their structure, risk and returns are otherwise identical to those of traditional bonds.

External Sector

  • With the signs of growth slowly becoming visible in merchandise trade, and robust capital flows, the external position appears robust, reflected inter alia in rising reserves and a strengthening of exchange rate.
  • India’s balance of payments situation improved in 2016-17 as a result of low and falling trade and current account deficits and moderate and rising capital inflows, resulting in further growth of foreign exchange reserves.
  • The current account deficit narrowed in 2016-17 to 0.7% of GDP, down from 1.1% of GDP the previous year, led by the sharp contraction in trade deficit which more than outweighed the decline in net invisibles.

Invisibles are payments and receipts resulting from international trade in services (because they are not seen to cross national borders).

Invisibles include banking, franchising, insurance, interest (on foreign investments), licensing, profit repatriation (from foreign subsidiaries), salary remittances (from nationals employed abroad), shipping, and tourism.

  • Export growth turned positive after a gap of two years and imports contracted marginally, so that India’s trade deficit narrowed to 5.0% of GDP in FY 2017 as compared to 6.2% in the previous year.
  • Among the major economies running current account deficit, India is the second largest foreign exchange reserve holder after Brazil.
  • The average monthly exchange rate of the rupee against the US dollar after depreciating continu-ously from November 2016 to January 2017, has appreciated continuously from February to June 2017. The rupee has performed better than many other EME-currencies in 2016-17.
  • The ratio of external debt to GDP fell to 20.2% from 23.5%. Cross country comparison of external debt indicates that India continues to be among the less vulnerable economies.

Agriculture and Food Management

  • The predominance of informal sources of credit for farmers is a concern.
  • There is regional disparity in the distribution of agricultural credit which needs to be addressed.

Industry and Infrastructure

  • Industrial performance has shown moderation from 8.8% during 2015-16 to 5.6% in 2016-17.
  • Industrial growth as per Index of Industrial Production (IIP) new series of 2011-12 shows overall IIP growth at 5% in 2016-17 as compared to 3.4% last year.
  • The Index of Eight Core Industries growth during 2016-17 was 4.8% as compared to 3.0% in 2015-16.

Eight Core Industries 

  • The Base Year of the Index of Eight Core Industries has been revised from the year 2004-05 to 2011-12 from April, 2017. 
  • Eight Core industries are namely Coal, Crude Oil, Natural Gas, Refinery Products, Fertilizers, Steel, Cement and Electricity and have a combined weight of 40.27 % in the IIP.

Services Sector 

  • The services sector remains the key driver of India’s economic growth, contributing almost 62% of its gross value added growth in 2016-17. However, the growth of this sector has moderated to 7.7% in 2016-17 compared to 9.7% achieved in the previous year
  • The performance of India’s Services Sector has been subdued in 2016-17 in line with the global trend. However, some services continue to be key drivers of India’s economic growth, such as telecom, tourism, aviation particularly domestic travel and even information technology-business process management (IT-BPM).
  • Satellite mapping and launching services are two areas in which India is making a mark and has huge potential for the future. 

Social Infrastructure, Employment and Human Development

  • The deterioration in quality learning in primary education sector and achievement of targeted enrolment level in the middle education is a challenge
  • Employment in India poses a great challenge in terms of its structure which is dominated by informal, unorganized and seasonal workers, and is characterized by high levels of under employment, skill shortages, with the labour markets impacted by rigid labour laws, and the emergence of contract labour.
  • The health sector in India faces many challenges in the form of declining role of public delivery of health services, high Out of Pocket expenses on health and issues of accessibility and affordability of health services for many.
  • The Government’s Swachh Bharat Mission with its focus on cleanliness and Open Defecation Free (ODF) India, has led to decline in the number of people who defecate in the open.

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