The Economic Survey Volume two tabled today in Parliament noticed a rekindled optimism on structural reforms in Indian economy.
The survey said various factors such as launch of the GST; Positive impacts of demonetization; decision in principle to privatize Air India; further rationalization of energy subsidies and Actions to address the Twin Balance Sheet (TBS) challenge contribute to this optimism.
The document also adds that a growing confidence that macro-economic stability has become entrenched is evident because of a series of government and RBI actions and because of structural changes in the oil market have reduced the risk of sustained price increases.
However the Survey cautions that anxiety reigns because a series of deflationary impulses are weighing on an economy, yet to gather its full momentum and still away from its potential.
These include: stressed farm revenues, as non-cereal food prices have declined; farm loan waivers and the fiscal tightening they will entail; and declining profitability in the power and telecommunication sectors.
The Survey notes that the oil market is very different today than a few years ago in a way that imparts a downward bias to oil prices, or at least has capped the upside risks to oil prices.
The Survey said Farm loan waivers could reduce aggregate demand by as much as 0.7 percent of GDP, imparting a significant deflationary shock to an economy.
It also said spurt in New Tax Payers and Reported Income After Demonetization; 5.4 lakh New Tax Payers Post-Demonetization. Demonetization’s impact on the informal economy increased demand for social insurance, particularly in less developed states.
