Economic Survey 2014-15 Highlights

The growth estimates of over 8 percent for the current year is on expectations that the monsoon will be favourable, as it was forecast to be normal, compared to last year "The Economic Survey indicates that a clear political mandate for reform and a benign external environment now is expected to propel India on to a double digit trajectory. Indian economy appears to have now gone past the economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances and oscillating value of the rupee," the survey said.

Source:pib The Survey outlines a medium-term strategy to create buffers for future economic downturns, which are

1. Reduce deficits a. Reduce fiscal deficit over the medium term to the established target of 3% of GDP b. Move towards the golden rule of eliminating the revenue deficit c. Ensure thereby that borrowing over the cycle is only for capital formation

2. Expenditure Control and Expenditure Switching a. Maintain a firm control on expenditures, in order to achieve the above targets b. Improve quality of public expenditure; shift away from public consumption (by reducing subsidies)towards investment

The Survey invokes the golden rule: Governments are expected to borrow over the cycle only to finance investment, and not to fund current expenditures. Hence Short-term targets should be set accordingly. This, the Survey argues, would assist the Government to take the economy back to a durably higher growth path. Here are the highlights 1. Supply side there are concerns but 2014-2015 double-digit growth trajectory is now possible. The CSO forecasts FY16 GDP growth between 8.1-8.5 percent. Meanwhile, FY15 GDP growth is seen at 7.4 percent The Survey says expectation for such a growth rate is due to a number of reforms that have already been undertaken and more that are being planned for. The Survey enlist various reform measures like de-regulation of diesel price, taxing energy products, replacing cooking gas subsidy by direct transfer on national scale, passing an Ordinance to reform the coal sector via auctions, increasing the FDI caps in defence, etc. 2. Economic Survey says overhauling of subsidy regime would pave the way for expenditure rationalisation

3. Farm output growth, however, is likely to lag behind at 4 percent 4. Government should ensure expenditure control to reduce fiscal deficit. So expenditure control and expenditure switching is key for government to achieve its fiscal deficit target 5. Retail inflation for FY15 is seen between 5 and 5.5 percent. Survey says inflation showing declining trend as a result of government measures and falling international oil prices 6. Foodgrain production for 2014-15 estimated at 257.07 mn tonnes; to exceed that of last 5 years by 8.5 million tones 7. Survey expects fy15 current account deficit at 1.3 percent of GDP 8.Economic Survey says outlook for external sector is perhaps most favourable since 2008 financial crisis 9. Food subsidy bill rises 20 percent in April-January 2014-15 at Rs 1.07 lakh crore 10. The Survey says that a close look at price subsidies, which are estimated to be about 3,78,000 crore rupees, about 4.24 percent of GDP, reveal that they may not be the government’s best weapon for fighting poverty. 11. Adopting what it called the JAM Number Trinity-Jan Dhan Yojana, Aadhaar and Mobile numbers would allow States to deliver subsidies to poor in a targeted and less distorted manner. The Survey states that fiscal action cannot wait and that it should continue in the upcoming year as well. It however adds that the need for accelerated fiscal consolidation has reduced, in view of reduced macroeconomic pressures. A flagship annual document of the Ministry of Finance, Economic Survey reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programmes, and highlights the policy

initiatives of the government and the prospects of the economy in the short to medium term.