India’s Economic Survey 2018, first since the implementation of GST, today painted a rosy picture of the economy ahead of the Union Budget 2018 due later this week, pointing out that the growth is on track, revenue collection is on the rise, and fiscal deficit is under reasonable check. This comes at a time when there are serious concerns over falling economic growth due to dwindling revenue collection after the implementation of GST and an economic activity still recovering from the shock of demonetisation.
India’s economic growth has recently faltered. But the Economic Survey 2018 projects a healthy growth at 7-7.5% for the next fiscal year 2018-19. Private investment is poised to rebound in the fiscal year 2019 and employment, education and agriculture will remain the focus in the medium term, the India Economic Survey 2018 noted. The survey also said that exports will the biggest source of upside potential for the economy.
GDP looks up
The buoyancy in the Economic Survey 2018 is against the government’s advance GDP data released earlier this month, which showed that the economy is expected to grow at a four-year low of 6.5% in the current fiscal, the lowest under the Modi-led government, mainly due to the poor performance of agriculture and manufacturing sector, as against 7.1% in the last fiscal.
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India is facing challenges from rising global crude oil prices, putting an upward pressure on fiscal deficit. The government has fixed fiscal deficit target to 3.2% of the GDP in the current fiscal as against 3.5% in 2016-17. However, in the upcoming Union Budget 2018, Finance Minister Arun Jaitley may give himself a little rope and relax the fiscal deficit target in the the wake of rising crude oil prices and subdued GST revenue collections.
GST: A new perspective
On the other hand, the Economic Survey 2018 sought to allay the fears and highlighted that the GST revenue would rise going ahead. Indeed, the latest government data showed an uptick in the GST collection for the latest month. Chief Economic Advisor Arvind Subramanian said in the survey: “(GST) has given a new perspective of the Indian economy and new data has emerged. There has been a fifty percent increase in the number of indirect taxpayers. There has also been a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises wanting to avail themselves of input tax credits.”
As for the fiscal deficit too, the survey highlighted the gradually improving situation. “Sound Public financial management has been one of the pillars of India’s macroeconomic stability in the last three years. In accordance with this, the Fiscal Deficit, Revenue Deficit as well as the Primary Deficit has been declining for the past 3 years,” the Economic Survey 2018 noted.
This year’s Economic Survey 2018 and Budget 2018 are first after GST was introduced. Apart from reviewing the developments in the country’s economy over the previous 12 months, the India Economic Survey document also presents the performance on major flagship programs. It also showcases and highlights the policy initiatives of the government. The prospects of the economy in the short to medium term are also presented through the Economic Survey.