3/10/2015

PrintRelease

PressInformationBureau
GovernmentofIndia
MinistryofFinance
27February201512:11IST

AGrowthRateofover8PerCentExpectedfortheComingYear
ADoubleDigitEconomicGrowthTrajectoryisnowaPossibility
SuchaGrowthCouldHelpinWipingEveryTearFromEveryEyeandRealizing
AspirationofIndiasYouth
ThereisPoliticalMandateforReformandBenignExternalEnvironmentnow,saysthe
EconomicSurvey
ThereisScopeforBigBangReformsnow

Indian Economy is lookingup with brighter prospects amongst the worlds major economies
today.TheEconomicSurvey201415presentedbytheFinanceMinisterShriArunJaitleytothe
Parliament today indicates that a clear political mandate for reform and a benign external
environmentnowisexpectedtopropelIndiaontoadoubledigittrajectory.ItstatesthatIndian
economy appears to have now gone past the economic slowdown, persistent inflation, elevated
fiscaldeficit,slackeningdomesticdemand,externalaccountimbalancesandoscillatingvalueofthe
rupee.

TheEconomicSurveytakingintoconsiderationthechangeofbaseyearbytheCentralStatistics
OfficeoftheNationalAccountsseriesfrom200405to201112,statesthatgrowthatmarketprices
for201516isexpectedtobe8.1to8.5percent.
ThegrowthrateinGDPatconstant(201112)marketpricesin201213was5.1percent,which
increasedto6.9percentin201314anditisexpectedtofurtherincreaseto7.4percentin201415
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(Accordingtoadvancedestimates).ThechangeinmethodologybytheCentralStatisticsOfficehas
also introduced the concept of Gross Value Added (GVA) at the aggregate and various sectoral
levels.
The Economic Survey says that expectation for such a growth rate is also due to a number of
reformsthathavealreadybeenundertakenandmorethatarebeingplannedfor.TheSurveyenlist
various reform measures like deregulation of diesel price, taxing energy products, replacing
cookinggassubsidybydirecttransferonnationalscale,passinganOrdinancetoreformthecoal
sectorviaauctions,increasingtheFDIcapsindefence,etc.
TheSurveyreportalsocommendedthefarreachingchangesbroughtaboutontheissueofsharing
ofrevenuesbetweentheCentreandStatesasrecommendedbythe14thFinanceCommission.
The Survey says that decline in inflation by over 6 percentage points since late 2013 and also
reductionofcurrentaccountdeficitfromapeakof6.7percentofGDPinthethirdquarterof2012
13 to about one (1) per cent in the coming fiscal year has made India an attractive investment
destinationwellabovemostothercountries.
The expected high growth rate in the coming year in the favourable economic environment has
createdahistoricmovementofopportunitytopropelIndiaintoadoubledigitgrowthtrajectoryto
attainthefundamentalobjectiveofwipingeverytearfromeveryeyeofthevulnerableandpoor
people of the country, the survey says. It also gives an opportunity to the increasingly young,
middleclassandaspirationalIndiatorealizeitsfullpotential.AsthenewGovernmentistopresent
itsfirstfullyearbudget,theEconomicSurveystatesthatitappearsthatIndiahasreachedasweet
spotandthatthereisascopeforBigBangreformsnow.
Thegrowthestimatesofover8percentforthecurrentyearisonexpectationsthatthemonsoon
willbefavourable,asitwasforecasttobenormal,comparedtolastyear.Howeverthegrowthrate
inGrossValueAdded(GVA)atbasicpricesinagricultureisprojectedtodeclinefrom3.7percent
in201314,anexceptionallygoodpreviousyearfromthepointofviewofrainfall,to1.1percent
in201415,thecurrentyearwithnotsofavourablemonsoon.
The Economic Survey has also drawn our attention to certain other stagnating or declining
elementsoftheeconomyintherecentpast.
It says that the growth in 201415 is largely driven by domestic demand. There is hardly any
externalsupporttogrowthin201415,asthegrowthinexportsisprojectedtobeonly0.9percent
and the growth rate of imports, around () 0.5 per cent. The deceleration in imports owe
substantiallytothesharpdeclineininternationaloilpricesinthecurrentyearthatcompressedthe
oilimportbill.
Italsosaysthattherehasbeenadeclineintherateofgrossdomesticsaving,from33.9percentof
the GDP in 201112 to 31.8 per cent in 201213 and further to 30.6 per cent in 201314, caused
majorlybythesharpdeclineintherateofhouseholdphysicalsavings.
Furtheritstatesthatinvestment rate over the past years, as measured by Gross capital formation
(GCF)asapercentageofGDPdeclinedfrom38.2percentin201112to36.6percentin201213
andfurtherto32.3percentin201314.
OninvestmentstheSurveyhadsignificantlycommentedthatwhileprivateinvestmentmustremain
theprimaryengineoflongrungrowth,thepublicinvestment,especiallyintherailways,willhave
to play an important role at least in the interim, to revive growth and to deepen physical
connectivity.
This Economic Survey prescribes, what its calls, a golden rule of fiscal policy saying that
governments are expected to borrow over the cycle only to finance investment and not to fund
current expenditures. It urged the government to aim at bringing down the centres fiscal deficit
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downto3percentofGDP.
TheEconomicSurveymadesomeinterestingcommentssayingthatpricesubsidiesdonotappear
to have had a transformative effect on the living standards of the poor, though they have helped
poor households to weather inflation and price volatility. It says that a close look at price
subsidies, which are estimated to be about 3,78,000 crore rupees, about 4.24 per cent of GDP,
reveal that they may not be the governments best weapon for fighting poverty. Dwelling upon
various subsidies to the poor, the Survey even stated that price subsidies are often regressive. It
said, an analysis of current subsidy scheme indicates that rich households benefit more from the
subsidy than a poor household. Among various examples that it had dwelt upon the Survey said
thatsubsidyonelectricitycanonlybenefittherelativelyrich.TheSurvey,however,concludedthat
eliminatingorphasingdownsubsidiesisneitherfeasiblenordesirable.Itsaidthatbyadopting
what it called the JAM Number TrinityJan Dhan Yojana, Aadhaar and Mobile numbers would
allowtheStatetodeliverthesubsidiestopoorinatargetedandlessdistortedmanner.
TheEconomicSurveyhadexpressedaseriousconcernthatseveralprojectshavebeenstalledand
suchatendencyisincreasedoverthepastyears.InthesamebreaththeSurveyreportexpressed
happiness that such stalling of projects seems to have plateaued. It suggested revitalizing public
privatepartnershipmodelofinvestment.
Dwelling upon the issue of manufacturing versus services for the growth of the economy the
Surveysays,bothareequallyimportantintheIndiancontext.Similarly,SkillingIndiaisnoless
importantanddeservesanequalattentionastheotherimportantgoalofMakeinIndia.
In a Chapter on a Common National Market for Agricultural Commodities the Survey without
making any conclusions suggested that there may be a Constitutional provision used to regulate
tradinginspecifiedagriculturalcommoditiestocreateaNationalCommonMarket.
InanexclusiveChapterrelatingtotheFourteenthFinanceCommission(FFC)theEconomicSurvey
quotedbothPt.JawaharLalNehru,thefirstPrimeMinisterofthecountryandthecurrentPrime
Minister Shri Narendra Modi and said that adoption of the recommendations oftheFFC andthe
creation of Niti Ayog earlier would further take forward the Governments vision of cooperative
andcompetitivefederalism.
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DSM/MA/KSP/MJPS/AK/DM

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