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Economic Survey 2016: Highlights

Government should review its medium-term fiscal strategy, Economic Survey recommended on Friday, an indication of the challenge Finance Minister Arun Jaitley faces to raise pay for government employees and bail out banks without increasing borrowing.

The Economic Survey, which sets the scene for Jaitley’s third annual budget on Monday, forecast that the Indian economy would grow by between 7.0 per cent and 7.75 per cent in the 2016-17 fiscal year that starts on April 1.

The survey was prepared by the finance ministry’s chief economic adviser Arvind Subramanian.

Following are the highlights of the report:


* 2016-17 expected to be challenging from fiscal point of view; time is right for a review of medium-term fiscal framework

* 2015-16 fiscal deficit, seen at 3.9 per cent of GDP, seems achievable

* Credibility and optimality argue for adhering to 3.5 per cent of GDP fiscal deficit target

* CPI inflation seen around 4.5 to 5 per cent in 2016-17

* Low inflation has taken hold, confidence in price stability has improved

* Expect RBI to meet 5 per cent inflation target by March 2017

* Prospect of lower oil prices over medium term likely to dampen inflationary expectations


* 2016/17 current account deficit seen around 1-1.5 per cent of GDP

* Rupee’s value must be fair, avoid strengthening; fair value can be achieved through monetary relaxation

* India needs to prepare itself for a major currency readjustment in Asia in wake of a similar adjustment in China

* Rupee’s gradual depreciation can be allowed if capital inflows are weak



* Estimated capital requirement for banks around 1.8 trillion rupees by 2018-19

* Proposes to make 700 billion rupees available via budgetary allocations during current and succeeding years in banks

* Government could sell off certain non-financial companies to infuse capital in state-run banks

* Corporate, bank balance sheets remain stretched, affecting prospects for reviving private investments

* Underlying stressed assets in corporate sector must be sold or rehabilitated

* Tax revenue expected to be higher than budgeted levels in 2015-16

* Proposes widening tax net from 5.5 per cent of earning individuals to more than 20 per cent

* Favours review and phasing out of tax exemptions; easiest way to widen the tax base not to raise exemption thresholds

* Subramanian says there is scope for easing monetary policy

* Says expenditure planning needs to be embedded in medium-term fiscal framework

* Calls for liquidity to be injected into the financial system


Economic Survey 2016 , Economic Survey 2016: Highlights