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Budget 2016: FM Arun Jaitley tabled the Economic Survey 2016 report in Parliament on Friday just ahead of the presentation of the Union Budget 2016-17 on Monday. The Survey shows the thought process of the Indian govt as well as state of the Indian economy. Here is all you need to know in 4 points before the Narendra Modi govt reveals its strategy to tackle the mammoth problems that the common man is facing today, 2 years down the line from when he took over as PM: (AP)
1. Budget 2016: FY17 growth pegged at 7-7.75%+: The FY16 Economic Survey projects FY17 GDP growth at 7-7.75% (RCMLe: 7.5%), led by consumption as spending increases post-7th CPC implementation and the return of a normal monsoon. However, it believes there are two main downside risks to growth: (1) worsening turmoil in the global economy, hurting exports and (2) a sharp rise in oil prices. The survey pegs India’s medium-term growth potential at 8-10%. (AP) -
2. Budget 2016: Inflation to remain range-bound at 4.5-5%: The survey states that low inflation has taken hold and confidence in price stability has improved. The CPI has declined to about half of what it was in earlier years – astute policies and inflation management by the Govt. through buffer stocking, timely release of cereals and import of pulses have helped keep prices of essential commodities in check. It expects CPI to be range-bound at 4.5-5% during FY17 and to close the fiscal under the RBI’s target of 5%. (AP)
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3. Budget 2016: Fiscal deficit target challenging for FY17: Based on an assessment of the pattern of revenue and expenditure during Apr-Dec’15, the survey states that the fiscal deficit target of 3.9% for FY16 is likely to be achieved (RCMLe: 4%). Although it acknowledges that the FY17 target will be a challenge due to implementation of the 7th CPC and OROP scheme, it stresses on improving tax compliance & administration and tapping new resources to raise more revenue, while improving the quality of expenditure to achieve sustained fiscal consolidation in order to maintain credibility. (AP)
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4. Budget 2016: CAD to come in at 1-1.5%: The survey points out that India’s external sector remains strong due to better macroeconomic fundamentals and low commodity prices, despite the volatility in global markets linked to concerns over China’s growth, financial markets and currency It expects the slowdown in exports to continue for a while before picking up in FY17. Volatility in global financial markets may have less of a negative impact on India’s exchange rate than other EMs. Also, the continuance of low global commodity prices augurs well for sustaining low trade and current account deficits. The survey projects a CAD-to-GDP ratio of 1-1.5% in FY17 (RCMLe: 1.3%) which would be more than fully financed through stable flows. (AP)
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