Budget 2018: Focus Likely to be on Farming, Education And Employment

"Going ahead, there is a need to focus on rapid improvement of human capital and agricultural productivity to sustain growth trajectory".

In the context of inflation, the Economic Survey states that Inflation during 2017-18 averaged the lowest in the last six years.

Subramanian said that this year oil prices went up that affected consumption and government finances and also held back real economic activity. The Survey fears that in case high global oil prices persist and stock market sees sharp correction, the capital flows could be adversely impacted.

The Indian government has released its annual Economic Survey this week which has drawn attention to the potential economic damage from climate change to agricultural livelihoods.

It also underlined the need to embrace agriculture science and technology "with renewed ardor".

According to the survey, India's foreign exchange reserves grew by 14.1 per cent $409.4 billion at end-December 2017and further surged to $413.8 billion on January 12, 2018.

Correcting for trends, the survey has figures to show that the number of tax payers has actually increased because of these policy measures, though many of these tax payers declared incomes that are close to the minimum threshold levels.

The Gross Domestic Product (GDP) growth was 7.1 per cent in 2016-17 and 8 per cent in the preceding year. "So, what explains the sudden convergence in stock markets?"

Mr Subramanian also said that there has been convergence in price-earnings (PE) ratio of the Indian and the USA stock markets in the last couple of years although the two economies have followed different paths.

ERP, in market parlance, refers to the extra return required on shares compared with other assets.

Sustaining these valuations will require future growth in the economy and earnings in line with current expectations, and require the portfolio re-allocation to be semi-permanent, he said.

"This needs to be supported with greater provision of resources for both tribunals and courts", it said adding courts may consider prioritising stayed cases and impose stricter timelines within which cases with temporary injunctions may be decided, especially when they involve government infrastructure projects. The survey also acknowledges that government's Beti Bachao, Beti Padhao and Sukanya Samridhi Yojana schemes, and mandatory maternity leave rules are all steps in the right direction.

"Further, urban local governments in India generate 44 per cent of their total revenue from own sources".

Subramanian said the growth would be higher than 7.5 per cent if exports pick up, but he listed oil prices and a correction in elevated share prices as downside risks.

Though concerns have been expressed about growing protectionist tendencies in some countries but it remains to be seen as to how the situation unfolds. "This implies that it will generate over 15 million jobs over the next five years, which will translate to about three million jobs annually", the survey report said.

In three out of 5 years between 2009 and 2013, India registered massive decline in Foreign Direct Investment, constraining Manmohan government's ability to create jobs and push economic growth. It declined to an annual average of Dollars 46 per barrel in 2015-16 and 2016-17.

  • Zachary Reyes