Economic Survey 2017 : Chapter 1: Economic Outlook and Policy Challenges

Avoiding silly mistkes during an exam
July 12, 2017
Economic Survey 2017 : Chapter 2: The Economic Vision for Precocious, Cleavaged India
July 14, 2017
Q: What were the two major economic policy developments in 2016?
Ans:
  1. Passage of constitutional amendment bill for GST
  2. Demonetisation
Q: What were the other economic policy developments in 2016?
Ans:
  1. Bankruptcy laws
  2. Institutional arrangements on monetary policy with RBI
  3. Legal basis for Aadhaar
  4. Measures to assist textile industry
  5. Unified Payments Interface platform
  6. FDI reforms
Q: What was the economic growth trend in 2016?
Ans:
  • India is a fastest growing major economy. The macroeconomic situation is stable with declining inflation and improving fiscal and external balances. But the global rating agencies have not upgraded India’s ratings form the BBB- level.
  • Economic growth saw a temporary decline in 2016-17.
  • The fixed investment is declining sharply as result of the stressed balance sheets of the corporate sectors. Improved monsoon has helped in modest pick up in agricultural sector.
  • The GVA(Gross value added) was 7.2%; CPI Inflation was below 5%; Current Account Deficit declined to 0.3% GDP; FDI inflows grew to 3.2% of GDP; The trade deficit declined; Fiscal deficit target of central government achieved; Consolidated deficits of states has increased.
Q: What is the difference between GDP and GVA?
Ans:
Indian Government has changed the metric it will use to measure economic growth from GDP to GVA from 2015 onwards to be more in line with global practices . GVA at basic prices will add the net of production taxes and subsidies to GDP at factor cost.

 

Q: What are the three long standing meta-challenges of Indian economy?
Ans:
Meta challenges means a classification of all challenges into certain categories. The Economic survey has identified 3 categories.
1.Inefficient redistribution
  • Redistribution means how the resources of the nation are shared among its people.
  • It is based on the principle of social justice. India has extensive efforts in redistribution.
  • There are about 950 central sector and centrally sponsored schemes and sub schemes which cost about 5% of GDP. But targeting is not efficient. Also implementation capacity of some state governments is poor
2.Private sector property rights
  • As India shifted from socialist to market economy, there is ambivalence in approach towards private sector and property rights.
  • This has stalled the strategic disinvestments, caused over indebtedness in corporate and banking sectors , retroactive taxations, IPR protection problems and defective agricultural marketing policies.
3.State capacity
  • State capacity is not sufficient to deliver the essential services like health and education and to regulate the markets.
  • Even though there are some examples in PDS, power reforms etc in some states, there are no good models for health and education.
  • One of the key problems of all welfare programmes is that the take-up and effectiveness of targeting will be correlated with a state’s institutional and implementation capacity. So lacunae in state capacity has rendered many programmes inefficient.
Q: How efficient redistribution and social justice can be achieved?
Ans:
The economic survey suggests better targeting through JAM(Jandhan, Aadhaar, Mobile) approach. Other wise radical new method of UBI(Universal Basic Income) can eliminate the inefficiencies.

 

Q: Is India’s ‘sweet spot’ enduring?
Ans:
The economic survey 2014-15 said about the ‘sweet spot’ of Indian economy that could launch India to a sustainable growth of 8-10 percent. This years survey suggest that shifts in underlying economic vision will be needed to overcome the major challenges, otherwise, India cannot take advantage of the ‘sweet spot’.

 

Q: What is a ‘sweet spot’ ?
Ans:
Is a term often used to refer to situations where economic data, are currently or expected to lead to the best overall economic situation.

 

Q: What is India’s ‘sweet spot’ ?
Ans:
India has now a stabilised macro-economic situation, a declining trend in inflation, and a benign external environment that make India the cynosure of investors. And the strong political mandate for economic change has imbued optimism.

 

Q: What are the global economic challenges that India may face?
Ans:
1.Isolation and nativism
          India’s growth ambitions need export growth of about 15-20 percent. About stagnant or declining trade at global level will affect India’s growth prospects. Also many countries are adopting protectionist policies, which can be a challenge to globalisation. There is a vacuum in international trade leadership, which should be used by India to advocate openness.
2.International oil prices
              The price decline in oil prices has started reversing. This will affect the advantages that India was having last year.
3.China’s currency policy
            Further decline in Yuan can create disruptions in China and its spill over effects for India . Appreciation of rupee can affect the exports from India.

 

Q: What is the expected economic performance for 2017-18?
Ans:
Expected real GDP growth will be 6.75 to 7.25 percent range. Tax collections will suffer due to increase in oil prices. But revenue may increase as result of Pradhan mantra Garib Kalyan Yojana. Revenue collection under GST may take some time to reach its full potential. 7th pay commission obligations will cause further burden on fiscal management.

 

Q: What are the most important reforms required to boost growth?
Ans:
  1. Strategic disinvestment
  2. Tax reforms
  3. Subsidy rationalisation
  4. Addressing the twin balance sheet problem
  5. labour reforms
  6. Promotion of labour intensive exports
Q: What is the status of India’s commitment towards the climate change?
Ans:
  1. India increased taxes on petroleum products when global oil prices declined
  2. India’s fossil fuel reliance is well below China and below US, UK and Europe at comparable stages of development
Q: How sanitation deficiencies affect women more than men?
Ans:
  1. Open defecation is threat to life and safety of women
  2. Reduction in food and water intake to avoid going out affects heath and nutrition
  3. Waterborne diseases affects mothers and children
Q: What are the impacts of demographic changes on the economy?
Ans:
The combined working age population of advanced countries started declining since 2016. Where as India’s working age population is projected to increase by a third over next 3 decades. Economic growth surges can be driven by demographic changes. The ratio of working to non-working age population(WA/NWA) indicates the impact on economic activity.

 

Q: What are the peculiar features of Indian demography?
Ans:
The decline in TFR(Total Fertility Rate) was much gradual compared to other countries in post World War II period. So the peak WA/NWA of India is lower than other countries and may remain in the peak for longer period. India’s WA/NWA is likely to peak at 1.7 value. There is large heterogeneity among states in their demographic profile and evaluation. So there is opportunity to attenuate the demographic imbalances via greater labour mobility.

 

Q: What is Total Fertility Rate?
Ans:
The general fertility rate is the number of live births per 1,000 women of childbearing age in a given year. Total fertility rate (TFR) figures the average number of children that would be born per woman if all women lived to the end of their childbearing years and bore children according to a given fertility rate at each age. TFR of 2.1 is considered as replacement level fertility. Replacement level fertility is the level of fertility at which a population exactly replaces itself from one generation to the next. That means population stabilisation will be achieved at this TFR.

1 Comment

  1. r singh says:

    thanks sir for providing this material

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