Economic Survey 2017-18 Chief Economic Adviser - PowerPoint Presentation

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Economic Survey 2017-18

Chief Economic Adviser

National Media Centre

29

th

January, 2018Slide3

Two Volumes

State of the Economy: An Analytical Overview and Outlook for Policy

A New, Exciting Bird’s Eye View of the Indian Economy Through the GST

Investment and Saving Slowdowns and Recoveries: Cross-Country Insights for India

Reconciling Fiscal Federalism and Accountability: Is there a Low Equilibrium Trap?

Is there a “Late

Converger Stall” in Economic Development? Can India Escape it?Climate, Climate Change, and AgricultureGender and Son Meta-Preference: Is Development Itself an Antidote?Transforming Science and Technology in IndiaEase of Doing Business’ Next Frontier: Timely Justice

An Overview of India’s Economic Performance in 2017-18Fiscal DevelopmentsMonetary Management and Financial IntermediationPrices and InflationClimate Change, Sustainable Development and EnergyExternal SectorAgriculture and Food ManagementIndustry and Infrastructure Services SectorSocial Infrastructure, Employment and Human Development

VOLUME I

VOLUME IISlide4

Overview of Presentation

Achievements

Analytical Review: Understanding temporary decoupling

Outlook for 2017-18 and 2018-19 and policy agenda

Highlights of research and analysis

Lessons and way forwardSlide5

Achievements

Launch of transformational Goods and Service Tax (GST)

Expeditious corrective actions

Decisive tackling of Twin Balance Sheet (TBS) challenge:

Of 4

Rs

, resolution (IBC) and recapitalization advancedValidation of achievements, recognition of medium-term prospectsSovereign ratings upgrade and jump in Ease of Doing Business rankingsSlide6

Temporary DecouplingSlide7

Demonetization and GST: Impact on competitiveness

Growth of Manufacturing Export Value

(Year-on-year, 3 month moving average)

Growth of Manufacturing Import Value

(Year-on-year, 3 month moving average)Slide8

High real interest rate, strong exchange rate

India’s monetary conditions became tight

Rupee appreciated overall by 9% since mid-2016Slide9

Robust and broad-based revival

** GVA and GFCF is based on H2 data. IIP is for Q3 estimated from Oct-Nov 2017 data.Slide10

Short-term outlook

Temporary factors receding, government providing demand

Major driver will be exports

Private investment depends on progress under IBC

Consumption affected by oil pricesSlide11

Growth projections

2017-18: Real GDP growth of 6.75 %; nominal GDP growth of 10.5%

2018-19: Real GDP growth of 7-7.5%Slide12

Real GDP growth (%)Slide13

Upside Potential

Export growth could be greater

Private investment boosted if IBC process progresses wellSlide14

Factors warranting heightened vigilance

Persistently high oil prices at close to current levels

Sharp corrections to elevated stock prices

Classic emerging market “sudden stall” in capital flows

Macro-economic policies may then need to be tighterSlide15

Oil prices

Period

US$/

bbl

2014-15 over 2013-14

-10.1%

2015-16 over 2014-15

-46.2%2016-17 over 2015-16

-11.4%2017-18 over 2016-17

15.9%

2018-19 over 2017-18

12%Slide16

Revival and risks: Rising stocks, rising interest ratesSlide17

Policy Agenda for Year Ahead

Support agriculture

Stabilize GST

Complete TBS actions with 4

th

R: Reforms

Privatize Air-IndiaHead off macro-economic pressures and possibility of a “sudden stall” from rising oil prices and sharp correction in stock pricesSlide18

Important new evidence

Post-demonetization and GST increase in new tax filers (over and above natural increase) of about 1.8 million and some boost to individual income tax collections (Box 2)

GST revenues doing well: Growth of about 12 percent and buoyancy above historical experience (Box 7)

Textile package boosted exports of key man-made garments by about 15 percent (Box 3)

Markets are misinterpreting borrowing by central and state governments (Box 8)

India’s stock market boom is different from other economies but warrants heightened vigilance (Box 9)Slide19

New Analysis and ResearchSlide20

New Insights from GST data

Reforms have increased tax rolls

50 percent increase in unique indirect taxpayers, after GST

1.8 million additional individual income tax filers since November 2016.

Formal sector much bigger than believed

75 million (30 percent) more if formality defined as firms providing social security

127 million (50 percent) more when defined as firms being in the GST net.Firm structure of exports highly diversified Top 1 percent of Indian exporters account for 38 percent of exports72, 68, 67, and 55 percent in Brazil, Germany, Mexico, & USA, respectively

States are big tradersinter-state trade is about 60 % of GDP, more than the 54% estimated in last Survey.States that export more internationally are more prosperousSlide21

India’s investment and saving slowdown is unusual, long and ongoing: Re-igniting investment is more important than raising savingSlide22

X

Globalization Backlash

Thwarted Structural Transformation

Human Capital Regression

Climate-change induced agricultural stress

1

2

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Late Convergence Stall? 4 Headwinds (“Horsemen”)Slide23

Change in weather (last decade over 1950-80): Hotter, drier, more extremeSlide24

Sex Ratio by Birth when Child is not the Last

Sex Ratio by Birth when Child is the Last

Some Evidence of a Son “Meta-Preference”Slide25

Source: UNESCO, World Economic Outlook (WEO), National Science Foundation (NSF).

Science and Technology needs a Big PushSlide26

Pendency of economic cases--in the major economic tribunals, tax department, High Courts, Supreme Court--high and rising

From Vertical Cooperative Federalism to Horizontal Cooperative Separation of Powers? Ease of Doing BusinessSlide27

Lessons for Future

Key challenges: education, employment, agriculture

From “crony socialism to stigmatized capitalism”

GST Council shows that “cooperative federalism” is a technology for reforms in several other areas