Economic Survey 2017-18: Volume I
The Economic Survey, submitted annually by the Ministry of Finance to both houses of parliament, provides data based on which the government formulates its budget. The survey presents an overview of the challenges to the economy, traces the development of its major sectors, and measures the performance of various policies and schemes. It also discusses how the ministry has addressed various challenges and makes recommendations for economic policy.
Volume I of the Economic Survey 2017-18 has chapters on the Goods and Services Tax (GST), the investment-saving slowdown, fiscal federalism* and accountability. And also on long-term economic convergence**, gender inequality, climate change and agriculture, delays in appeals and judicial process, and science and technology.
This is the first Economic Survey to come out after the introduction of GST and so, it delves deeply into how the tax has affected internal and external trade, the size of the tax net, and the formal and informal sectors.
*Fiscal federalism refers to the financial relations between different units of a federal government system.
**Economic convergence refers to the hypothesis that the per capita income of poorer economies will grow faster than that of richer economies, and that all economies will eventually converge in terms of their per capita income.
Since the Goods and Services Tax was introduced in March 2017, the survey found, there was a 50 per cent increase (3.4 million) in the number of unique indirect taxpayers, and many had voluntarily chosen to be a part of GST. Internal trade was about 60 per cent of GDP, up from last year’s survey, and this compared very favourably with other large countries.
The survey says that India’s formal sector, especially its non-farm payroll, is substantially greater than is believed. Formal enterprises that provide social security provisions had an estimated payroll of about 31 per cent of the non-agricultural work force, while enterprises that were part of the GST net had a payroll share of 53 per cent.
The central and state governments spent, on average, 15-20 times more per capita than Rural Local Governments (RLGs) or panchayats. Urban Local Governments (ULGs) or municipalities spent about 3 times more than panchayats. This gap had persisted despite per capita spending by RLGs increasing almost fourfold since 2010-11.
Since gram panchayats were dependent on devolved funds (from the central government), they spent the bulk of these funds on earmarked areas, such as roads, basic services, sanitation and community assets. Spending on purely local public goods like irrigation was not a priority.
Agricultural growth in India had declined substantially over time – from a ‘standard deviation’ (a kind of statistical measure) of 6.3 per cent between 1960 and 2004 to 2.9 per cent since 2004.
The survey found that shortages of water and land, deterioration in soil quality, and climate change-induced rise in temperatures and rainfall variability, were going to impact agriculture. Close to 52 per cent (73.2 million hectares) of the total net sown area was still un-irrigated and rainfed.
They survey said that in the last four years, the levels of real agricultural GDP and real agricultural revenues had remained constant. Climate change could further reduce farm incomes by up to 20-25 per cent in the medium term.
The trend of acceleration in rural wages (agricultural and non-agricultural), which occurred in 2016 because of increased activity as a result of a strong monsoon, seemed to have decelerated in 2017-2018.
The area of land sowed for kharif and rabi crops for 2017-18 was estimated to have declined by 6.1 per cent and 0.5 per cent, respectively. Sowing had been less too, for both kharif and rabi crops, reducing the demand for farm labour. Pulses and oilseeds had sold below the minimum support price, while tomatoes, onions and potatoes had fluctuated between high and low prices.
The survey differentiated between the well-irrigated, cereal-intensive northern Indian agriculture, for which it felt that policy must shift from price support and subsidies to direct benefit transfers, and the non-cereal agriculture in central, western and southern India, where the problems were very different – inadequate irrigation, rain dependence, insufficient investment in research and technology, market barriers and weak post-harvest infrastructure, among others.
Analysis of multiple rounds of the Demographic Health Survey (DHS) and the National Family Health Survey (NFHS) data suggested that over the last 10-15 years, India’s performance had improved on 14 of 17 indicators related to women’s agency, attitudes and the quality of healthcare organisations.
However, India’s adverse female to male sex ratio revealed 63 million ‘missing’ women. The preference for boys manifested itself in bearing children till a son was born, notionally creating about 21 million ‘unwanted’ girls.
Focus and Factoids by Ragini Rao Munjuluri.
Department of Economic Affairs, Economic Division, Ministry of Finance
Government of India
29 Jan, 2018