Economic Survey As It Happened: FM tables report in Parliament

4.00 pm: With that, we bring our live blog to a close. Finance Minister Arun Jaitley today tabled the Economic Survey 2017 in Parliament.Authored by Chief Economic Advisor Arvind Subramanian, the report provided a succinct summary of the economy, outlined its outlook going forward, discussed novel potential policy measures such as Universal Basic Income and tackled challenges that the economy is facing. 3.30 pm: What was common between nearly every East Asian country, which witnessed rapid economic boom after the World War II?The Economic Survey holds answers."In the successful East Asian economies, countries where GDP growth booms averaged between 7-10 per cent, growth in the exports of these two (clothing and footwear) sectors was exceptional. The average annual growth of apparel exports was over 20 per cent, with some close to 50 percent; and that of leather and footwear averaged more than 25 percent."It points out that India, however, did not witness a similar growth during its economic boom, so much that India was missing a "historic opportunity" where other Asian countries are occupying the space in these sectors that is being vacated by China.The challenges? Logistics, labour regulations and tax and tariff policies, besides sector-specific challenges. 3.00 pm: We're still combing through the 335-page document and unearthing nuggets.Here's where the Survey invokes Mahatma Gandhi to weigh the case for universal basic income, an idea which is now trending. It quotes the Mahatma as saying:“My ahimsa would not tolerate the idea of giving a free meal to a healthy person who has not worked for it in some honest way, and if I had the power I would stop every Sadavarta where free meals are given. It has degraded the nation and it has encouraged laziness, idleness, hypocrisy and even crime. Such misplaced charity adds nothing to the wealth of the country, whether material or spiritual, and gives a false sense of meritoriousness to the donor. How nice and wise it would be if the donor were to open institutions where they would give meals under healthy, clean surroundings to men and women who would work for them…only the rule should be: no labour, no meal.”But it goes on to add its own spin to the Mahatma's views:"The Mahatma as the embodiment of universal moral conscience would have seen the possibility of UBI in achieving the outcomes he so deeply cared about and fought for all his life. But the Mahatma as moralist would have had doubts because of seeing uncompensated rewards as harming responsibility and effort. As a fiscal conservative he would permit UBI only if convinced that macro-economic stability would not be jeopardized. Recognizing the difficulty of exit, the Mahatma as astute political observer would have anxieties about UBI as being just another add-on government programme. But on balance he may have given the go-ahead to the UBI."Read the chapter. In full.2.45 pm: The Economic Survey has some more gems on demonetisation. Sample this:"The experience, thus far, of demonetization is instructive. In one perspective, demonetization has been a redistributive device to transfer illicit wealth from the rich to the rest, via the government. In the short run at least, the costs are being borne to a great extent by those in the informal/cash-intensive sectors that tend to be less well-off than the rich. In one sense, this could be thought of as inefficient redistribution. So, if, subsidies have been an inefficient way of redistributing toward the poor, demonetization could be seen as an inefficient way of redistributing away from the rich."2.40 pm: An interesting chart from the Survey that serves as a thinly-vieled criticism of the role of ratings agency. It shows that between while China's GDP growth rate has fallen and debt-to-GDP ballooned over the past seven years, it was the subject of a ratings upgrade (from A+ to AA-). On the other hand, India's GDP growth rate inched up while credit-to-GDP remained stable. Still, its rating continues to stay at BBB, just one notch above junk grade.2:30 pm: Demonetisation, the great levellerThe lower middle class and rural population may have been the worst hit by demonetisation, but black money holders too suffered in the process, says the Survey.It concedes that there was heavy laundering of money by those with undisclosed wealth, using schemes like back dated receipts among others."In all these cases, black money holders still suffered a substantial loss, in taxes or “conversion fees”. Moreover, bank accounts are still being screened for suspicious transactions, which means that those who engaged in laundering run the risk of punitive taxes and prosecution, in addition to the fees or taxes already paid," the Survey noted.2:15 pm: Demographic dividend peak nearing, but no cause for alarmThe Survey says that growth boost from the demographic dividend is likely to peak within the next five years, as India's share of working age population plateaus. But there is no cause for panic as India may not see the sharp growth decelerations experienced by the East Asian countries because its working age ratio will fall much more gradually than those in other countries. "In addition, the sharp demographic differences between peninsular India and hinterland India will generate wide differences in the timing of the peak, as wellas opportunities to attenuate demographic imbalances via greater labour mobility," says the survey2.00 pm: The Economic Survey report is up on the government's website.Some interesting tidbits, this one from the chapter 'Eight interesting facts about India'- New estimates based on railway passenger traffic data reveal annual work-related migration of about 9 million people, almost double what the 2011 Census suggests.- China’s credit rating was upgraded from A+ to AA- in December 2010 while India’s has remained unchanged at BBB-. From 2009 to 2015, China’s credit-to-GDP soared from about 142 percent to 205 percent and its growth decelerated. The contrast with India’s indicators is striking.- Welfare spending in India suffers from misallocation- India has 7 taxpayers for every 100 voters ranking us 13th amongst 18 of our democratic G-20 peers.- India’s share of working age to non-working age population will peak later and at a lower level than that for other countries but last longer. - As of 2011, India’s openness - measured as the ratio of trade in goods and services to GDP has far overtaken China’s, a country famed for using trade as an engine of growth. India’s internal trade to GDP is also comparable to that of other large countries and very different from the caricature of a barrier-riddled economy.- Spatial dispersion in income is still rising in India in the last decade (2004-14), unlike the rest of the world and even China. That is, despite more porous borders within India than between countries internationally, the forces of “convergence” have been elusive.- Evidence from satellite data indicates that Bengaluru and Jaipur collect only between 5 percent to 20 percent of their potential property taxes1.55 pm: The CEA is discussing the near-term economic impact of demonetisation, explaining why the GDP forecast has such a wide range.1.45 pm: According to the CEA, the government's seven biggest achievements of the government are: GST, Bankruptcy Bill, MPC, Aadhaar, FDI reforms, UPI and promoting labour-intensive stories.1.35 pm: "I will focus on what are the most pressing issues. I will review developments, discuss near-term outlook and outline impact of demonetisation," the CEA says."Despite the economic impact of demonetisation, FCNR outflows and the US elections, India's macros continue to remain stable," the CEA says.1.30 pm: The CEA is holding a press conference.1.25 pm: To solve the problem of NPAs, the Economic Survey is clearly suggesting what looks like a "bad bank" solution. Excerpts.
"The Survey shows that our country has been trying to solve its ‘Twin Balance Sheet’ (TBS) problem – overleveraged companies and bad-loan-encumbered banks, a legacy of the boom years around the Global Financial Crisis. So far, there has been limited success. The problem has consequently continued to fester: Non-Performing Assets (NPAs) of the banking system (and especially public sector banks) keep increasing, while credit and investment keep falling. Now it is time to consider a different approach – a centralised Public Sector Asset Rehabilitation Agency (PARA) that could take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt.

As per the Survey, gross NPAs has climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016. At this level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia. The consequent squeeze of banks has led them to slow credit growth to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades. As this has occurred, growth in private and overall investment has turned negative. A decisive resolution is urgently needed before the TBS problem becomes a serious drag on growth."

1.20 pm: To increase the benefit of demonetisation, the government should quickly remonetise, bring real estate under GST's ambit, reduce taxes and provide a stable tax regime, the CEA writes in one of the chapters of the Economic Survey outlining the cash ban's impact. 1.15 pm: Those who want to watch the press conference can go to the Finance Ministry's Facebook page.1.09 pm: The CEA's press conference will get under way anytime now. If you're tuning in now, get up to speed by catching up on seven key takeaways from the Economic Survey here.1.08 pm: The Economic Survey has highlighted 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 has highlighted the need to further privatize the Civil Aviation, Banking and Fertilizer sectors.Read more.1.07 pm: The impact of demonetisation as per the CEA.

Demonetisation 1: Currency+governance+social engg measure w short-run costs, potential long-run gains #EcoSurvey Ch3 pic.twitter.com/TalRVj6AHg

— arvind subramanian (@arvindsubraman) January 31, 2017

1.06 pm: The CEA is doing a "Tweetstorm", posting excerpts from various chapters of the #EcoSurvey.

Demonetisation 1: Currency+governance+social engg measure w short-run costs, potential long-run gains #EcoSurvey Ch3 pic.twitter.com/TalRVj6AHg

— arvind subramanian (@arvindsubraman) January 31, 2017

1.05 pm: Flashes from the Economic Survey:- FY18 GDP Growth Seen In Range Of 6.75-7.5 percent- Demonetisation Risk To FY18 GDP Growth Forecast- See Fiscal Windfall From PM Garib Kalyan Yojana- Fiscal Windfall From Low Oil Prices To Disappear In FY18- Excise-related Taxes To Fall Around 0.1% Of GDP In FY18- Lower Interest Rates In FY18 Will Boost Economy- Economic Recovery From Demonetisation Needs Policy Support- Govt Staff Allowances To Weigh On Fiscal Math In FY18- Rebound In Global Demand & Upside Risk To FY18 Growth- Outlook For FY18 GST Collections Must Be Cautious- Basic Tenets Of FRBM Remain Valid- Market Interest Rates Seen Lower In FY18 Due To Note Ban- Sharp Rise In Prices In FY18 May Cap Room For Monetary Easing- Fiscal Gains From GST To Take Time To Be Realised- Operational Framework Of FRBM Needs To Be Modified1.02 pm: The market, however, has trimmed its losses following the tabling of the Economic Survey. Bond yields, too, have fallen. The Nifty is down only 0.3 percent now.12.59 pm: Excerpts from the Economic Survey.
"India’s economic experience shows that the fiscal activism embraced by advanced economies- giving a greater role to counter-cyclical policies and attaching less weight to curbing debt- is not relevant for India. This observation was made in the Economic Survey 2016-17 presented by the Finance Minister Shri Arun Jaitley in the Parliament today. The Economic Survey has also stated that India’s fiscal experience has underscored the fundamental validity of the fiscal policy principles enshrined in the Fiscal Responsibility and Budget Management Act (FRBM) Act 2003.

Since the 2008-09 Global Financial Crisis (GFC), internationally fiscal policy has seen a paradigm shift from the emphasis on debts to deficits, arguing for greater activism in flows (deficits) and minimizing concerns about sustainability of the stocks (debt). But India’s experience has reaffirmed the need for rules to contain fiscal deficits, because of the proclivity to spend during booms and undertake stimulus during downturns. India’s experience has also highlighted the danger of relying on rapid growth rather than steady and gradual fiscal and primary balance adjustment to do the “heavy lifting” on debt reduction. In, short it has underscored the fundamental validity of the fiscal policy principles set out in the FRBM.

Even as the basic tenets of the FRBM remain valid, the operational framework designed in 2003 will need to be modified for the fiscal policy direction of India of today, and even more importantly the India of tomorrow. This setting out a new vision through an FRBM for the 21st century will be the task of the FRBM Review Committee."

12.57 pm: First few flashes coming in aren't great news for pro-growth advocates who want the government to loosen its purse strings and spend.The Economic Survey report is cautioning the government to continue to stay on a fiscally-conservative course.

Preface to #EcoSurvey outlines contents and its aspiration (from Keynes). pic.twitter.com/q2YgHYrAHs

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— arvind subramanian (@arvindsubraman) January 31, 2017

12.50 pm: Finance Minister Arun Jaitley has tabled the Economic Survey in Parliament. FY18 GDP growth is seen at 6.75 percent-7.5 percent. A wide range, possibly because the CEA wants to see more data over the impact of demonetisation.12.30 pm: The text of the President's speech is out. Read here.12.15 pm: Taking a break from the news on Economic Survey and the Budget, the Donald Trump government has introduced a bill in the US Congress that attempts to reform the H1-B visa process.The bill proposes to more than double the minimum wage for visa holders from USD 60,000 to USD 130,000.IT shares have predictably tanked (IT index is down 3.5 percent), taking down the market with it (now off 0.8 percent).12.08 pm: In other news, Kerala MP E Ahamed fainted during the Parliament briefing and is being rushed to hospital, NDTV reports.12.05 pm: Meanwhile, CNBC Awaaz is reporting via sources that the Economic Survey will forecast the yearly GDP growth at 7.7 percent-8.1 percent.That would come as music to the ears of the stock market, which would latch on to any such news.12.00 pm: The Economic Survey should be tabled anytime now. CEA Arvind Subramanian will hold a press conference outlining its key takeaways at 1 pm.11.55 am: There will be plenty of interesting economic concepts that are expected to find a mention in the Economic Survey. For instance, universal basic income is something that might find a mention.Read about it and others in our piece on 5 things to watch out for Read more at : five things to watch out for in the survey.11.45 am: Key takeaways from the President's speech:- Focus on urban infrastructure continues with an outlay of Rs 50,000 crore. Metro rail for 4 cities has been sanctioned along with extension of Chennai metro has been approved. Reflects the continuing commitment of the government to upgrade infrastructure, which is vital to efficiency and export competitiveness. - Various measures to curb black money has been taken which will continue to remain the focus area. This should help achieve the twin objects of widening the tax base as well as lowering tax rates wherever possible. Read more here.11.32 am: We'll keep getting you catchy bytes from the President's speech.11.28 am: The tabling of the Economic Survey should take place shortly. The survey, running into hundreds of pages, provides an insight into the government's thinking on economic issues even as some critics choose to look upon it as nothing more than the CEA's wish-list, which is rarely acted upon.Still, for anyone who closely tracks the economy, it offers a treasure trove of data through which to evaluate it.11.21 am: Other highlights from the President's speech:- Sowing area has shown 6 percent improvement in yields during rabi season- 1.4 lakh villages declared defecation free- Free gas connections provided to 5 crore households- 'Beti Bachao Beti Padhao' Yojana yielding encouraging results- Rs 6,000 crore announced to boost employment and exports in apparels industry- 1 crore bank accounts have been opened for young girls11.17 am: "My government has taken proactive steps to control prices of pulses, to protect farmers' interest and those of consumer. Eight lakh tonnes of pulses have been procured," the President says.

Pradhan Mantri YUVA Yojana launched for promoting entrepreneurship education and training amongst 7 lakh students #PresidentMukherjee

— President of India (@RashtrapatiBhvn) January 31, 2017

11.15 am: Prime Minister Narendra Modi looks on keenly as the President highlights the government's achievements.11.13 am: The government is working hard to boost financial inclusion. It has so far issued 20 crore RuPay cards. Over Rs 16,000 crore has been distributed via self-help groups, says the President."The core of my government's policies is welfare of the poor," he says.11.10 am:"The government is committed to achieving its aim of providing Housing for All by its stated goal of 2022," he says.11.08 am: "My government is working hard to alleviate poverty, boost financial inclusion, improve quality of life, increase access to sanitation and clean energy," the President says.11.06 am: Meanwhile, the team worked on the Economic Survey poses for the camera.

Union Finance Minister Shri @arunjaitley with Chief Eco. Adviser Shri @arvindsubraman & his team which authored the Economic Survey 2016-17 pic.twitter.com/7ixakyh83G

— Ministry of Finance (@FinMinIndia) January 30, 2017

11.05 am: "This is a historic session, with Union Budget being merged with the Railway Budget," he says, adding that the government has taken "remarkable" steps to fight black money recently.11.03 am:  The President starts his speech by providing a broad outline of the economy.11.00 am: Welcome to live coverage of tabling of the Economic Survey 2017. A flagship annual document of the Ministry of Finance, the Economic reviews the developments in the Indian economy over the previous 12 months, summarises the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. This document is presented to both houses of Parliament during the Budget Session, and is typically authored by Chief Economic Advisor (currently Arvind Subramanian).

Economic Survey is to be tabled in the Parliament shortly. Know your Economic Survey: pic.twitter.com/PLrZcrL79m

— Ministry of Finance (@FinMinIndia) January 31, 2017

President Pranab Mukherjee is addressing both houses of Parliament, which commenced with the Budget session today.