India is a Haven of Macroeconomic Stability: Economic Survey

The Wire will continue to update the Economic Survey’s developments as more updates are released

Arvind Subramanian. Source: YouTube screengrab

Arvind Subramanian, the architect behind the Economic Survey 2015-16. Credit: YouTube

The Economic Survey is many things to different people. While it is officially a government’s report card of the economy and the economic future of the country, some view it as a pointless exercise in theatrics, drafted as it is by the Chief Economic Adviser and his team.

The last Economic Survey (2014-15) for instance, predicted 8%-plus GDP growth, with actual growth turning out to be a little less (7.6%).  

Others, however, believe the Survey to be an accurate pulse-taking of the economy that most importantly provides accurate clues as to what the finance minister plans for the Union Budget, which is usually released a day or two after the Economic Survey is tabled.

This year, the Economic Survey also comes with some puzzling circumstances: The Finance Ministry called for an unusual meeting of investors, economists and journalists on Saturday– the day between the release of the Economic Survey and the Union Budget– only to cancel it later after speculation arose that the meeting was called to explain a possible fiscal slippage.

This year’s Survey proclaims the Indian economy to be a “haven of macroeconomic stability, resilience and optimism” while being tempered by pointing out that critical short-term challenges that await us include the “twin balance sheet problem: the worsening financial positions of public sector banks and corporate houses”.

Economist Arvind Virmani, in remarks to Economic Times, points out this Survey must be seen in relation to the last year’s Survey. “Last year, they talked about a sweet spot in the global economy. I think they went much too far. They are now compensating for it.” This year’s Survey is a little more cautious for sure, while expressing concern over delays in factors such as the GST roll-out.

While the Economic Survey is generally an eminently readable document, especially the year it was drafted by then-CEA Raghuram Rajan, we break down its salient parts in an easy form for you while commenting on what exactly it means. The Wire will continue to update the Economic Survey’s developments as and when the full report is put up online

Growth Projections

1) The economy will grow at 7-7.5% in the fiscal year to March, 2017. This is a wise estimate, with a number of analysts pointing out in the current climate of global panicky investors, a slightly more conservative target is better.

2) In the next couple of years ahead, the survey also states that the economy’s growth momentum will hit 8% or more largely because of the government’s commitment “to carry the reform process forward”.

Fiscal Deficit

1) The Survey points out that the 3.9% fiscal deficit target “seems achievable”. For the 2015-16 financial year, the government had set a target of 3.9% and for 2016-17, the target set was 3.5%.  Despite the challenges posed by a lower-than-projected GDP growth, the government believes that the target will be hit, which speaks well of the pattern of revenue and expenditure in this fiscal.

2) The coming fiscal year, however, is expected to be challenging from a fiscal point of view.


1) Inflation based on the Consumer Price Index (CPI – CPI inflation) is projected by the Survey at 4.5-5%. The Survey points out that “low inflation has taken hold and confidence in price stability has improved”.

However, a number of analysts and experts believe that this is a little too ambitious and that the government may be over-shooting.

Current Account Deficit

1) The current account deficit for 2016-17 is seen around 1. – 1.5% of GDP. The government believes that while the export slowdown may continue, “continuance of low global commodity prices augurs well for sustainable low trade and current account deficits”.


1) According to Reuters, the Survey has proposed widening the tax net from 5.5% of earning individuals “to more than 20 per cent”.

2) Higher property taxes may soon become a reality. The Survey calls for this, while pointing out that higher realty taxes will “improve local government finances while discouraging speculation in the sector”.

Featured image credit: worldeconomicforum/Flickr, CC-BY-NC-SA 2.0