ECONOMIC SURVEY FY17 – SETS THE ROADMAP FOR BUDGET FY18

By Ruma Dubey

The Economic Survey has been tabled today, following the tradition of presenting this important financial document a day before the Union Budget.

This document is basically an annual statement which is put together by the Finance Ministry of India, showcasing the economic development during the course of the year. The draft of the survey is prepared by Department of Economic Affairs and cleared by Chief economic Advisor and the secretary Economic Affairs. The final version is vetted by Finance secretary and Finance Minister. The Union Budget is a statement for the future while the Economic Survey is a statement of the past fiscal.

In that aspect, the Economic Survey is an important document because it helps us assess the performance of the country in the past fiscal, allowing us to compare the actual performance with what the Govt had promised in the Union Budget. At the same time, it shows us the general health of the economy, based on which we can get a rough idea about what to expect from the Union Budget.

So what does the Economic Survey of 2016-17 present this time? The Govt has finally acknowledged the impact of demonetization on the economy. The Survey says that GDP for FY18 will come in at 6.75 to 7.5% compared to the earlier estimate of 7.1% given in FY17. In fact the Survey has talked so much about demonetization, more so than any other Govt agency and even the RBI.

The Survey has also acknowledged the effect of rising crude oil price on inflation and how that puts the RBI in a tight bind when it comes to bringing down rates.

A very good and pragmatic message which has come forth loud and clear is the need to privatize civil aviation, banking and fertilizer sectors. This is a very good and progressive thought but given the rule of the Trade Unions in PSUs, this is better said than actually done.

Another message which has come across is the Govt needs to keep a strict eye on the fiscal deficit and needs to adhere to fiscal prudence, not indulging in unwanted largesse which could otherwise lead to a runaway fiscal deficit, which given the rising crude oil price needs a close watch.

There was a lot of brouhaha about the ushering in of the Universal Basic Income (UIB) and expectation was that the Survey would devote a significant portion of the survey on this. But the Survey seems to have made a mere mention and said that UIB as a concept needs to be brought in, saying that it the best alternative to plethora of State subsidies for poverty. UIB is a scheme for the poor, where money will be transferred directly in the identified families bank account. But the Survey just left it at that – it did not really go all out as all had expected and did really push for replacing the existing poverty alleviation schemes with UIB.

In taxation, GST remains a loud voice and is expected to play a vital role in the indirect tax reform process, starting from FY18.

Thus based on this Economic Survey, what can one expect, on a broader, economic aspect from this Budget?

• Moves towards fiscal consolidation and exert fiscal prudence
• Urgent need for ushering in UIB
• Improve revenue collection through reforms and sops for industry
• Keep the collection targets from GST on a cautious peg
• Demonetization needs to be supported by policy actions
• A centralised Public Sector Asset Rehabilitation Agency (PARA) that could take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt.
• To remonetize - bring real estate under GST's ambit, reduce taxes and provide a stable tax regime
• Sell stake in PSUs – civil, fertilizer and banking

As the countdown begins for tomorrow, the biggest financial event of the fiscal, let us wait and see how the Modi sarkar measures up to our expectations – being unreasonably populist or responsibly practical.