PSUs in need of Rs 1.8 lakh crore capital, containing fiscal deficit to be a challenge,Economic Survey says
NEW DELHI: Ahead of the Union Budget, the Economic Survey termed external environment as challenging but projected a 7-7.5 per cent GDP growth rate in the next fiscal which could accelerate to eight per cent in a couple of years.
The Economic Survey for 2015-16, which was tabled in Parliament on Friday, also made a case for carrying forward the reform process to achieve macro-economic stability.
Inspite of challenges and lower than projected GDP growth rate during 2015-16, “the fiscal deficit target of 3.9 per cent of GDP seems achievable.”
After a 7.2% economic growth in 2014-15, it said the expansion in economy will be 7.6% in the current fiscal, the fastest in the world.
However, it cautioned that if the world economy remained weak, India’s growth will face considerable headwinds.
On the domestic side, two factors can boost consumption, increased spending from higher wages and allowances of government workers if the 7th Pay Commission is implemented and return of normal monsoon.
The survey said, Indian stocks are relatively resilient despite volatility in the worldwide financial markets and the country can become a leading investment destination going ahead.
“The (Indian) market has rebounded time and time again, and it is hoped that as the global financial markets settle down, India can become the leading investment destination owing to its robust macroeconomic fundamentals,” as per the 2015-16 report card of the state of the economy tabled by Finance Minister Arun Jaitley in Parliament today.
“Despite volatility in global financial markets, the Indian equity market has been relatively resilient during this period compared to the other major emerging market economies,” it added.
The Survey also said that the average borrowings by banks have increased significantly in the immediate aftermath of US fed rate hike, resulting in appreciation of the rupee.
(With PTI inputs)
Following are the updates from the Economic Survey.
Focus on fiscal consolidation limits public spending
Credibility argues for adhering to 3.5% fiscal aim in FY17
Scope to charge richer households higher power tariff
High industrial power tariffs hurt Make in India
Large farmers may have to buy urea at market price
Must bring urea under nutrient based subsidy programme
Need reasonable taxation for better-off farmers
In FY16, year-on-year growth in gross bank credit outstanding has remained around 10%.
Sluggish growth attributed to incomplete transmission of the monetary policy, unwillingness of banks to lend credit on account of rising NPAs, and more attractive interest rates for borrowers in the bond markets.
Despite volatility in global financial markets, the Indian equity market has been relatively resiliant during this period compared to the other major emerging market economies.
India can become the leading investment destination owing to its robust macroeconomic fundamentals.
Banking sector gross credit deployment has been sluggish duirng the financial year. Increasing levels of gross Non Performing Assets (NPA) have reduced the banking sector’s capacity to lend.
Sluggish growth and increasing indebtedness in some sectors of the economy have impacted the assets quality of banks and this is a cause of concern.
Plan to infuse Rs 70,000 crore in PSUs in next few years.
PSU banks to need Rs 1.8 lakh crore capital by FY19
(Image Courtesy: PIB)
Bank appetite for additional bond issue seen limited
Expect some slippage from fiscal deficit in near term
Fertiliser subsidy should shift to direct cash transfer
India’s fiscal space is constrained
CAD at 1-1.5% expected
Chances of FY17 growth rising significantly not high
7th Pay Commission, OROP to have higher implication on FY17 spending
India must plan for major currency readjustment in Asia
Tax base should widen to over 20% from the current 5.5%
Higher property tax rates to check realty speculation
Reasonable taxation needed on farm, realty income
Need to phase out tax exemptions
FY17 expected to be challenging on fiscal front
India needs to focus on supplies for food security
Current RBI policy rate seems neutral
FY16 subsidy bill seen below 2% of GDP
FY17 GDP growth between 7-7.5%
FY16 GDP seen at 7.6%
Low impact of seventh Pay Commission on inflation
Fiscal deficit seen at 3.9%
8% growth possible in couple of years
Long term growth protential 8-10%
Global demand to hit growth in near term
Foreign demand seen weak
April-January trade gap 106.8 billion
FY17 expected to be challenging
India stable amid gloomy globa markets
FY16 fiscal gap target seems achievvable
Long run growth potential 8-10%
Confidence in price stability
Cad at 1.4% of Apirl – September
Posted by Konima Choudhary
on February 26, 2016. Filed under Editorial
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