New Delhi: The Economic Survey 2016-17 presented in Parliament on Tuesday projected the economy to grow in the range of 6.75% to 7.50% in fiscal year 2017-18 post demonetisation.
The statistics department has projected the economy to grow at 7.1% in 2016-17 without taking into account the impact of demonetisation, while the International Monetary Fund (IMF) has pared down its growth projection for India to 6.6% in 2016-17 and 7.2% in 2017-18.
The survey prepared by chief economic adviser in the finance ministry Arvind Subramanian said the adverse impact of demonetisation on GDP growth will be transitional. “Once the cash supply is replenished, which is likely to be achieved by end March 2017, the economy would revert to the normal," the survey said.
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The Economic Survey pointed out that demonetisation will have both short-term costs and long-term benefits. “Briefly, the costs include a contraction in cash money supply and subsequent, albeit temporary, slowdown in GDP growth; and benefits include increased digitalization, greater tax compliance and a reduction in real estate prices, which could increase long-run tax revenue collections and GDP growth," it said.
The Economic Survey 2016-17 also advocated the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.
The survey tabled in Parliament a day before the budget by Union finance minister Arun Jaitley juxtaposes the benefits and costs of the UBI scheme. The survey said the UBI, based on the principles of universality, unconditionality and agency, is a conceptually appealing idea but with a number of implementation challenges lying ahead especially the risk that it would become an add-on to, rather than a replacement of, current anti-poverty and social programmes, which would make it fiscally unaffordable.
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Subramanian, who has prepared the survey, had earlier said that UBI that guarantees a minimum income to every citizen is an “exciting idea" and he will further elaborate his thoughts on the topic in the Economic Survey. There has been speculation about the finance minister announcing a UBI-like scheme in some form in his budget, after the Jammu and Kashmir (J&K) government became the first state government to commit to UBI for all citizens living below the poverty line.
In his budget speech earlier this month, J&K finance minister Haseeb Drabu said he would want to create a social security fund and provide a UBI to all those living below the poverty line through a direct benefit transfer system.
However, Drabu put the onus on the Central government for initiating the process to implement UBI in the state.
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The survey highlights difficulties in privatizing public enterprises, even for firms where economists have made strong arguments that they belong in the private sector. In this context, the survey pointed towards the need to further privatize the civil aviation, banking and fertilizer sectors.
The survey listed some of the challenges that might impede India’s progress such as ambivalence about property rights and the private sector, deficiencies in state capacity, especially in delivering essential services and inefficient redistribution.