India Economic Survey 2018: Chief Economic Advisor Arvind Subramanian says that the Indian economy is showing robust signs of recovery and a series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 percent this fiscal and will rise to 7.0 to 7.5 percent in 2018-19. Addressing media in the press conference post release of the economic survey, CEA Arvind Subramanian noted that in recognition of of the initiatives taken by the government of India, global rating agency Moody’s had upgraded India’s sovereign rating after a long gap of 14 years.
In November-17, Moody’s upgraded India’s local and foreign currency issuer ratings to Baa2 from Baa3 and changed the outlook on the rating to stable from positive. Further, the CEA Arvind Subramanian also noted that India has also jumped several points in World Bank’s Ease of Doing Business ranking. We take a look at four key takeaways from Chief Economic Advisor Arvind Subramanian post release of India Economic Survey 2018.
GST- an important achievement
Chief Economic Advisor Arvind Subramanian lauded the government’s initiative surrounding the launch of GST in July-17. Arvind Subramanian pointed out that given the scale, complexity and scale of the new indirect tax regime, GST qualifies as an important achievement. The highlights of the economic survey relating to GST were there has been a 50% increase in number of indirect taxpayers; large increase in voluntary registrations; distribution of GST base closely linked to size of economies; strong correlation between export performance and state’s standard of living and India’s formal sector was found to be substantially greater than currently believed.
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Tackling twin balance sheet issue
The chief economic advisor point out to the decisive steps taken by the government to tackle the twin balance sheet issue. The twin balance sheet issue deals with over leveraged companies and banks with NPAs. CEA pointed out that the government has now put in place IBC (Insolvency and Bankruptcy Code) which provides a resolution framework that will help corporates clean up their balance sheets and reduce debts. Further, the CEA pointed out to the PSU bank recap as a measure of decisively tackling the NPA issue. The Finance Ministry has tightened the noose on public sector banks (PSBs), saying that the massive Rs 2.11 lakh crore bank recapitalisation announced by the government will alongside reforms by the banks to ensure that the banking crisis does not get repeated.
Growth picking up as impact of reforms dissipate
The CEA noted that the growth is recovering as the impact of structural reforms such as demonetisation and GST begin to dissipate. After November 2016, 10.1 million filers were added compared with an average of 6.2 million in the preceding six years.” The level of tax filers by November 2017 was 31 percent greater. This translates roughly into about 1.8 million additional tax payers due to demonetization-cum-GST, representing 3 percent of existing taxpayers, said the survey.
Projected growth higher than CSO
CEA Arvind Subramanian said that the growth rate projected by the economic survey is marginally higher than CSO’s estimate, as the CEA has taken into account the recent developments too. The Survey had cited the recapitalisation plan for government-owned banks, the recent easing on foreign direct investment (FDI) rules and boosting of Indian exports amidst a global recovery as other factors underpinning its gross domestic product (GDP) growth projection, which is higher than the 6.5 per cent growth projected by last month by the Central statistics Office (CSO).