Copy of the Presentation made by Chief Economic Adviser, Dr. Arvind Subramanian during his Press Conference on 26 May on the occasion of the government completing one year in office.

1. Indian Economy: An
Interim Update
Chief Economic Adviser
May 26th, 2015

2. -5.0
0.0
5.0
10.0
15.0
20.0
Percent
Rural wage growth
CPI
WPI
Good News: Improving Inflation and
Inflation Prospects

3. Fiscal Indicators of General Government (% of GDP)
2014-15 RE 2015-16 BE
Fiscal Deficit 6.9 6.5
Revenue Deficit 2.9 2.4
Capital Expenditure 4.6 5.1
RE= Revised Estimates; BE= Budget Estimates;
Improving Quality and Quantity of Fiscal
Consolidation at General Government Level
Based on analysing 17 State Governments’ Budgets.

4. Current Account Balance as a per cent of
GDP
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0 2004-05:Q2
2004-05:Q4
2005-06:Q2
2005-06:Q4
2006-07:Q2
2006-07:Q4
2007-08:Q2
2007-08:Q4
2008-09:Q2
2008-09:Q4
2009-10:Q2
2009-10:Q4
2010-11:Q2
2010-11:Q4
2011-12:Q2
2011-12:Q4
2012-13:Q2
2012-13:Q4
2013-14:Q2
2013-14:Q4
2014-15:Q2
2015-16*

5. Assessing Growth in Short Run
Y = C+ Ipvt+ Ipub + FD’+ (X-M)
Where,
Y= Output
C= Consumption
Ipvt= Private Investment
Ipub= Public Investment
FD’= Fiscal Deficit net of Ipub
X-M= Net Exports

6. -15.0
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
Non-oil exports
Non-oil & non-gold
imports
Merchandise Trade: Yet to Recover

7. 0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0 Jun/13
Jul/13
Aug/13
Sep/13
Oct/13
Nov/13
Dec/13
Jan/14
Feb/14
Mar/14
Apr/14
May/14
Jun/14
Jul/14
Aug/14
Sep/14
Oct/14
Nov/14
Dec/14
Jan/15
Feb/15
Mar/15
Services Exports: Still Weak

8. 3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
Jun/13 Sep/13 Dec/13 Mar/14 Jun/14 Sep/14 Dec/14 Mar/15
Aggregate
Private
Public
Projects Under Implementation : Stalling Rate
Declines in 2014-15

9. 5.0
7.0
9.0
11.0
13.0
15.0
17.0
Nominal
Real
Real Bank Credit Growth Started picking up
in Q4:2014-15

10. 5.0
10.0
15.0
20.0
25.0
30.0
Real growth in financial loans to
corporates
Including ECB Including ECB and Trade credit
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
Including ECB and corporate bonds
Corporate Financing picked up in
FY2014-15

11. Assessing Growth in Short Run
• Y = C+ Ipvt+ Ipub + FD’+ (X-M)
• X-M weak because of slowing world growth and
appreciating real effective exchange rate
• Ipvt weak—Balance sheet stresses in corporates
and banks
• Fiscal (FD’): small consolidation
• Therefore economy reliant on C and Ipub

12. -2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Q1:11
Q2:11
Q3:11
Q4:11
Q1:12
Q2:12
Q3:12
Q4:12
Q1:13
Q2:13
Q3:13
Q4:13
Q1:14
Q2:14
Q3:14
Q4:14
Manufacturing
value added
Core WPI
Quaterly IIP
Growth rate
Trend in IIP better than indicated by the Series

13. Uptick in Indirect Tax Collection in April 2015:
Most Recent Indicator of Economic Activity
Tax Head Growth
(after netting out additional revenue
measures; April 2014 number in
brackets)
Customs 13.5% (-11.7%)
Central Excise 8.8% (-3.9%)
Service Tax 7.0% (14.3%)
Excise plus service tax 7.8% (6.1%)
Total 9.8%
Assuming buoyancy of between 0.9 and 0.8, nominal GDP growth is between
10.9 % and 12.3%. Real GDP growth, assuming GDP deflator of 3 percent, is
between 7.7% and 9%

14. Conclusion-1
• Substantial Structural Reforms
Governance Institutional Macroeconomic policy Sectoral
Decisive reduction in
corruption reflected in;
i. Clean and transparent
auction of coal and
spectrum
ii. Liberalization of gold
import regime,
reducing the rents
intrinsic to
quantitative
restrictions
i. Unleashing cooperative
and competitive
federalism by adopting
FFC recommendation and
creating Niti Aayog
ii. Close to securing political
agreement to launch
game-changing GST
iii. Pursuing the JAM agenda
in cooking gas
iv. Pursuing financial
inclusion by creating Jan
Dhan accounts
v. Initiating comprehensive
social security via
pension, life insurance
and accident schemes
i. Commitment to
fiscal discipline
ii. Increasing public
investment to
revive growth
iii. Facilitating
declining inflation
via agricultural
policies
i. Liberalizing FDI
in insurance,
defence, and
railways
ii. Deregulating
diesel, petroleum,
and cooking gas
sectors and
adhering to the
commitment to
deregulation
iii. Easing the cost of
doing business

15. Conclusion-2
• Post war history suggest structural reforms
take time to influence growth
• Policy support is crucial over short run,
especially consumption, public investment,
and private investment