The Economic Survey 2016-17 was tabled by Finance Minister Arun Jaitley on the first day of the Budget Session of Parliament.
The Survey highlighted challenges that India needs to overcome to achieve its goal of becoming a robust economy. The Survey notes the disruption caused by Centre's demonetisation drive but is hopeful of making long-term gains.
The Survey was prepared by the Finance ministry's Chief Economic Adviser Arvind Subramanian.
Here are the major takeaways of the economic survey 2016-17:
1) GDP growth: The survey said that the GDP gowth in 2016-17 will dip to 6.5 per cent, down from 7.6 per cent in the last fiscal, a direct consequence of the Centre's demonetisation drive.
However, it is likely to improve in the next fiscal as the survey pegs the GDP growth between 6.75 pc to 7.5 pc in 2017-18.
2) Adverse impact of Demonetisation: Demonetisation has surely hit the economy below the belt with survey predicting a decline in growth rate by 0.25-0.5 per cent. "The cash squeeze… will have significant implications for GDP, reducing 2016-17 growth by ¼ to ½ (0.25 to 0.5) percentage points compared to the baseline of 7%,”the survey said.
Note ban may affect supplies of certain agricultural products like sugar, milk, potatoes and onions and moderate the growth rate of industrial sector to 5.2 per cent this fiscal, from last fiscal's 7.4 per cent.
However, the Survey also hit an optimistic note saying, “demonetisation” would bring long-term benefits to the economy.
CEA Subramanian believes that the adverse impact of note ban on GDP growth will be transitional
3) Universal Basic Income: The Survey also proposes a Universal Basic Income as an alternative to the various social welfare schemes in an effort to alleviate poverty.
“… the UBI is a powerful idea whose time even if not ripe for implementation, is ripe for serious discussion,” the survey said.
It would cost between 4 and 5 per cent of GDP, the survey adds.
A form of universal basic income was tested in Madhya Pradesh in 2011, with direct cash transfers to the accounts of beneficiaries.
4) 'Labour migration at all-time high'
Migration of workers is at an all-time high, with female workers migrating at twice the rate compared to their male counterparts in the 2000s, notes the Survey.
“The study based on the analyses of new data sources and new methodologies also shows that the migration is accelerating and was particularly pronounced for females,” says an official statement.
5) Reduction in subsidies
The Survey notes that over the past two years, the government has made considerable progress toward reducing subsidies, especially related to petroleum products. Technology has been the main instrument for addressing the leakage problem and the pilots for direct benefit transfer in fertilizer represent a very important new direction in this regard, the survey adds.
6) Poor public redistribution system
The survey says that the redistribution by the government is far from efficient in targeting the poor. This is intrinsic to current programs because spending is likely to be greatest in states with better institutions and which will therefore have fewer poor. At the level of the states, competitive populism is more in evidence than competitive service delivery.