Economic Survey 2016-17: Long-term Damage From Demonetisation Is Minimal
The Economic Survey 2016- 2017 has just been tabled in
parliament by the Finance Minister. It asserts, flying in the face of more
pessimistic forecasts from various quarters, that the GDP for 2016-17 will range between
6.75% and 7.1%.
This implies that the negative and slowing impact engendered
by the structural adjustment of demonetisation will not cast any shadow beyond
the first two quarters of 2017-18.
And also that India will resume being clear and above the
fastest growing economy in the world in 2017-2018.
This, aided partially by the positive effects of
demonetisation, the world’s biggest digitalisation exercise, and a surge in
cashless transactions.
Notably, agriculture is to grow at 4.1% in 2016-17, up from
1.2% in 2015-2016. This is particularly commendable because much was made of
how badly the demonetisation had affected this vital sector.
Even the Service Sector, said to have been severely impacted
by a global slowdown in demand for its wares, is projected to grow at 8.1%.
The Survey, prepared under the auspices of the Chief
Economic Adviser (CEA) Arvind Subramanian, was presented after the President’s
Address.
The President laid out a long list of the government’s
accomplishments over the last year in a thoroughly upbeat manner. He covered the
implementation of One Rank One Pension (OROP), the ‘surgical strike’ across the
line of control (LoC) with Pakistan, and
the positive effects of demonetisation, amongst very many other issues such as
electrification, green energy etc.
However, the President’s address coincided with news of the
US introducing an H1B Visa Bill in US Congress, resulting in jitters in India’s IT industry stocks listed, even though the
road to the legislation being actually passed is generally a long-winded one.
The Congress Party, spearheaded
by former Finance Minister P Chidambaram and former Prime Minister Manmohan
Singh, aired its own ‘Real State of the Economy
2017’ document at a press conference on
the 30th January, a day before parliament reconvened for the Budget Session.
Predictably, it asserted that the economy was in much worse
shape than the government would have the people believe. It said the GDP figure
was projected to plummet to the IMF forecast number of 6.6%, down from the
erstwhile 7.6% reckoned prior to demonetisation.
Former FM P
Chidambaram lamented the low credit growth, which he said was at 5%,
characterising it as the ‘lowest in decades’. ‘Where are the jobs’, asked
Congress. ‘Where is the new capital investment?’
However, the economy is actually in fairly good shape.
Inflation is down with the Wholesale Price Index (WPI) averaging at 2.9%. Core
inflation is stable at under 5%. The Current Account Deficit (CAD) narrowed to
0.3%. And these figures are considerably better than the state of affairs when
this government came into power after 10 years of UPA administration. GDP was at just 4.74% in 2013-14 for
example.
By way of a new idea, the Economic Survey suggested that a
new body should be set up to look at the rehabilitation of public sector
assets. If this means unlocking the value of land banks and the like, it may
prove to be a very good idea, freed from the operational pressures which the
managements of public sector units (PSUs) routinely face.
However, throwing good money after bad at failing public sector
units to revive their operations has been tried before and has failed miserably.
It will be interesting to see what impact the Economic
Survey has on the Annual Budget to be
tabled this time on February 1st for the very first time, instead of
the last day of February.
What is certain is much of the doom forecasting
coming from the Opposition post-demonetisation, has been clearly overblown.
For: ABP Live
(612 words)
January 31st 2017
Gautam Mukherjee
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