Overview of the economic survey.

1. Economic Survey 2017-18
29th January 2018
By: Anjali Gupta

2. Economic Survey?
• A document which projects the official
version of the state of the economy
• Precursor to the Budget
• Discusses the outlook, prospects and
challenges of the economy
• Recommends reform measures that are
essential to propel the economy
• A report of the past year as well as the
vision document for the next year
• Presented every year in parliament
during the Budget session
“With this cover, we
are extending our
support to the
movement for
women’s rights.”
CEA- Arvind Subramanian

3. Highlights :
GDP Growth
2017-18
(Previous year
estimate)
6.75%
(6.75-7.5%)
2018-19
(Estimate)
7–7.5 %
Gone down steadily over the
past four years
Target is to bring below 2%
Below 4% for more than 12
months (since Nov 2016)
CPI- lowest in 6 years

4. Short Term Overview :
 Launch of transformational Goods
and ServiceTax (GST)
• Expeditious corrective actions
 Decisive tackling ofTwin Balance
Sheet (TBS) challenge:
• Of 4 R’s, Resolution (IBC) and large
recapitalization of PSUs
 Decoupling (temp) in first half of the
year
• Due to demonetization, GST, Raising real
interest rates, Fall in food prices
 Revival in Second Half
• 30 spots in Ease of Doing Business by
World Bank
• FDI Liberalization increased 20% inflows
 Oil Prices hike – a threat

5. Medium Term Overview :
 GST Council
• Cooperative Federalism
• Not a Substitute; but a Complement
• Common AgriMarket, DBT.. Etc
 “Socialism with limited entry” to “Marketism without exit”
• IBC
• FRDI
• Auctioning off Stressed Assets
 Redirecting away from subsidies
 NPAs resolution

6.  Vigilance on vulnerability
• Current account
• Oil prices
• Fiscal balance
• Improved tax collection
 Private sector performance
• Challenges posed by technological changes
• Corruption,Weak Governance
• “Crony socialism to stigmatized capitalism”
 Unfinished agenda in terms of 3 meta challenges:
• Addressing inefficient redistribution
• Accelerating the limited progress in delivery of essential public services, especially health and
education
• Correcting the ambivalence toward property rights, the private sector, and price incentives.

7.  Reforms have increased tax rolls
• 50 percent increase in UNIQUE indirect taxpayers, afterGST
• 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 more egalitarian than in large countries
• Top 1 percent of Indian exporters account for 38 percent of exports
• 72, 68, 67, and 55 percent in Brazil,Germany, Mexico, & USA, respectively
 States prosperity positively correlated with their international and inter-state trade
• Inter-state trade is about 60 % of GDP, more than the 54% estimated in last Survey.
• States that export more internationally are more prosperous

8. Other Insights :
 Clothing incentive package boosts exports of readymade garments:
• Increase exports of readymade garments by about 16 per cent due to Rebate of State Levies (ROSL)
 Parents continue to have children until they get desired number of sons
 To reignite growth, raising investment more important than raising saving
 Low Direct tax collections by state/local governments compared to the counterparts
in other federal countries
 Extreme weather adversely impacts agricultural yields:
• Extreme temperature increases and deficiency
• Impact twice as large in un-irrigated areas as in irrigated ones
 Substantial avoidable litigation in tax arena:
• Low success rate which is below 30 per cent.
• About 66 % of pending cases accounted for only 1.8 % of value at stake.
• 0.2 % of cases accounted for 56 % of the value at stake.

9. From Vertical Cooperative Federalism to Horizontal
Cooperative Separation of Powers? Ease of Doing Business
0
50
100
150
200
250
0
1
2
3
4
5
6
7
8
9
10
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Telecom Electricity Green Tribunal
Consumer Disputes Indirect Tax (RHS) Income Tax (RHS)
Pendency of economic cases--in the major economic tribunals, tax
department, High Courts, Supreme Court--high and rising

10. Late Convergence Stall? 4 Headwinds (“Horsemen”)
X Globalization
Backlash
Thwarted
Structural
Transformation
Human Capital
Regression
Climate-change
induced
agricultural stress
1 2
3 4

11. 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

12. “Government does not have to do anything
radical, just finishing what it has started already
would be a very ambitious and fantastic agenda
to complete”
CEA - Arvind Subramanian