The annual Economic Survey was tabled in both houses of Parliament today. The main takeaway from the survey was its prediction that India would grow at a rate of 7-7.5% in the financial year 2018-19. The economy seems to be recovering from the demonetisation slowdown and the teething troubles of the GST rollout. In fact, the survey suggests that the impact of GST from here on would largely be a positive for national commerce.

An extract from the survey said, “A series of major reforms undertaken over the past year will allow real GDP growth to reach 6.75 percent this fiscal and will rise to 7 to 7.5 percent in 2018-19, thereby re-instating India as the world’s fastest growing major economy.”

“With world growth likely to witness moderate improvement in 2018, expectation of greater stability in GST, likely recovery in investment levels, and ongoing structural reforms, among others, should be supporting higher growth. On balance, country’s economic performance should witness an improvement in 2018-19,” it continued.

Prescriptions of the survey included shutting down or merging failing banks to improve the financial health of the banking sector and focusing on agriculture, employment and education as these were key areas which if invested in would yield dividends for the economy and the people both in the short and long term.

GST
GST is expected to reach a steady state after teething problems that had business owners scratching their heads for a few months finding how best to comply to the change in method of taxation. Multiple rate changes, a fixture of the last six months, may also become a thing of the past as the new mode of taxation settles into a rhythm with business owners having more clarity on what they have to do.

Household spending is on the mend again as the immediate effects of the GST rollout and demonetisation dissipate and the economy reaches a point of normalcy after adapting to these radical shifts.

Oil & Inflation

The report was cautionary about rising oil price saying they could reduce the real growth rate because of the inflation caused by rising price. “Against the emerging macroeconomic concerns, policy vigilance will be necessary in the coming year, especially if high international oil prices persist or elevated stock prices correct sharply, provoking a ‘sudden stall’ in capital flows,” it said.

Overall

The survey advised the government to focus on employment and education (skilling youngsters and finding proper employment jobs for a growing workforce). It also recommended introducing sustainable practices in agriculture, improving farm productivity and making the agriculture sector more resilient to inevitable change.