Econ Survey points to further privatisation of banking, aviation

The Economic Survey for 2016-17, tabled in Parliament by Finance Minister Arun Jaitley today, underlined the need for more reforms. The Survey's GDP growth figure for the current fiscal is lower than 7.1% the Central Statistics Office had forecast earlier this month.

The Survey lists some of the challenges that might impede India’s progress. These include ambivalence about property rights and the private sector, deficiencies in state capacity, especially in delivering essential services and inefficient redistribution.

The Survey highlights difficulties in privatising public enterprises, even for firms where economists have made strong arguments that they should be in the private sector. In this context, it pointed towards the need to further privatise civil aviation, banking and fertiliser sectors.

The Survey stated that the capacity of the state in delivering essential services such as health and education is weak due to low capacity, with high levels of corruption, clientelism, rules and red tape.

At the level of states, competitive populism is more in evidence than competitive service delivery, it added.

Constraints to policy making due to strict adherence to rules and abundant caution in bureaucratic decision-making favours status quo, it cautioned.

According to the Survey, redistribution by the government is far from efficient in targeting the poor. This is intrinsic to current programmes because spending is likely to be greatest in states with better institutions and which will therefore have fewer poor.

It noted that over the past two years, the government has made considerable progress towards reducing subsidies, especially related to petroleum products.

Noting that India has come a long way in terms of economic performance and reforms, the survey said there is still a journey ahead to achieve dynamism and social justice and completing this journey will require broader societal shifts in the underlying vision.

Highlights of Economic Survey 2016-17

• GDP growth for next fiscal pegged at 6.75-7.5%
• Growth this fiscal to be 6.5%
• Prescribes cut in individual Income Tax rates, real estate stamp duties
• Income Tax net could be widened gradually by encompassing all high income earners
• Time table for cutting corporate tax should be accelerated
• Fiscal windfall likely from Pradhan Mantri Garib Kalyan Yojana, low oil price
• Farm sector to grow at 4.1% this fiscal, up from 1.2% last year
• Fiscal gains from GST will take time to realise
• Demonetisation may affect supplies of certain agricultural products like sugar, milk, potatoes and onions
• Growth rate of industrial sector to moderate to 5.2% this fiscal, from 7.4% last fiscal
• Remonetisation to eliminate cash crunch by April 2017
• Demographic dividend to peak in next five years
• Service sector estimated to grow at 8.9% in 2016-17