Economic Survey: India’s GDP to Expand 7.75%, GST, CPI, Fiscal Deficit Key Drivers

Economic Survey for 2017-18, was presented in the Parliament today. Survey discussed about the major achievements of the past year which includes the Goods and Services Tax, further liberalization of FDI, resolution of the Twin Balance Sheet (TBS) problem under the new Indian Bankruptcy Code, implementing a major recapitalization package to strengthen the public sector banks and the export growth from the global recovery.

However, the increase in global crude oil prices could dampen the growth expectations next fiscal. India’s fiscal and current accounts, both tend to deteriorate when oil prices rise. The government is expecting recovery in investments, improved global growth outlook and stabilization of GST to lead growth. The biggest source of growth is the exports sector.

Key Takeaways of Economic Survey

• The survey said that the reform undertaken last year will make GDP to reach 6.75 percent this fiscal and will rise to 7 to 7.5 percent in 2018-19.
• The government expects the fiscal deficit to remain at 3.2 per cent of the GDP in 2017-18 and CPI inflation to remain at an average 3.3 per cent.
• The employment, education and agriculture will be the key focus areas in the medium term.
• There has been a large growth in the number of indirect taxpayers. Many have voluntarily chosen to be part of the GST, especially the small enterprises which buy from large enterprises and want to avail themselves of input tax credits. The indirect taxes grew by 18.3 per cent during April-November 2017. Therefore, the net exports of goods and services will decline in 2017-18
• After remaining in negative territory for few years, the growth of exports have rebounded into positive one during 2016-17 and are expected to grow faster in 2017-18. The Textile package has increased the exports of key man-made ready-made garments by 16%
• The Average Inflation during 2017-2018 averaged to lowest in the last 6 years.
• IT sector is facing governance challenges, as its model of providing low-cost programming for foreign clients are under threat due to the rapid technological change
• The private investment is poised for a rebound.
• There is approximately 1.8 million additional taxpayers due to demonetization-cum-GST, which represents 3 per cent of existing taxpayers

The next major trigger for the market is Union Budget 2018-2019. The finance minister Arun Jaitley in the parliament will present that on Thursday, 1st February 2018.