Charu Kartikeya
30 January 2018, 18:39 IST
Economic Survey 2017-18: Don’t miss the bad news that lies in the fine print
National dailies published a day after the release of Economic Survey 2017-18 have painted a rosy picture about the state of the economy. The reality is far from it and has been suitably captured in the later pages of the survey.
On their front pages, nearly all newspapers have focused only on the improvement in the growth rate, 25 basis points higher than what CSO estimates had projected earlier.
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The real story is in the multiple concerns very much flagged by the survey but covered in the inside pages of the dailies. The growth rate of 6.75% itself, first of all, is hardly promising. It, in fact, is at the lower end of the range projected by the survey last year (6.75 to 7.5%).
Apart from that, this year's survey has warned about multiple threats to economic revival, giving a gloomy assessment of the state of affairs, on many fronts. In short, a lot of bad news. Let us take you through some of these areas of concern.
Disappointing growth – Putting current fiscal's growth at 6.75%, the Economic Survey has forecast a 7-7.5% growth rate for the next. The four-year average comes to 7.3%, which is lower than UPA-2 government's five-year average of 7.44%.
Higher fiscal deficit – The survey has indicated that the union government's fiscal deficit target could get wider than the targeted 3.2% of GDP. “Reflecting largely fiscal developments at the Centre, a pause in general government fiscal consolidation relative to 2016-17 cannot be ruled out,” it has said.
Poor state of agriculture – While Prime Minister Narendra Modi has incessantly been talking about trying to double the income of farmers, the survey has said that goal “increasingly runs up against the contemporary realities of Indian agriculture, and the harsher prospects of its vulnerability to long term climate change”. In fact, climate change could impact Indian agriculture so much that it could dent the income of farmers in un-irrigated areas by 25%.
Investment slowdown – The survey has unequivocally said that investment slowdown, visible for eight consecutive years now, is not over yet. A one percentage point fall in investment rate, according to the survey, is expected to affect growth by 0.4-0.7 percentage points.
Poor performance of road sector – The survey has also exposed one of the myths being propagated about the performance of the Modi-government in one particular sector. The road sector, it was said, was moving at a smooth pace, but the Economic Survey has said that loans not paid back in the road construction sector have gone up twenty times from 2012-13. Over 20% of the total loans given to the sector were non-performing assets (NPAs), a nearly 20 time jump from 2012-13.
Unnecessary tax litigation – A key concern flagged by the survey is the Income Tax department's tendency to enter into tax litigation, despite increasingly losing such cases. The survey has identified the tax department as the largest litigant, but has pointed out that the department “unambiguously loses 65% of its cases”. This, according to the survey, was “taking a severe toll on the economy in terms of stalled projects, mounting legal costs, contested tax revenues, and reduced investment”.