Finance Minister Arun Jaitley will table the Economic Survey in Parliament on Tuesday. The Economic Survey is an official report on the economy and will set the tone for the Union Budget 2017-18, which will presented on Wednesday. As Jaitley readies to give a detailed account of prospects and the policy challenges, here are five things to watch out for:Demonetisation
In November, Prime Minister Narendra Modi, in a surprise announcement, scrapped Rs 500 and Rs 1000 notes, taking away their legal tender status from midnight of November 8. The government has pitched the move as part of a broader strategy to clamp down on India’s bustling parallel economy where deals take place in cash, as also a step towards ushering India into a “less-cash” economy.
The demonetisation move has set in motion the world’s largest currency culling exercise with people given 50-days to deposit old notes in banks and post-offices by December 30. Critics have spared no punches about the move for causing pain to unsuspecting people resulting in job losses, as well as forcing long queues at ATMs and bank branches.
Analysts will keenly watch what the Economic Survey, authored by Chief Economic Adviser Arvind Subramanian and his team, says about demonetisation and its impact on the economy.
GDP projections
The government has projected that the Indian economy will likely grow at 7.1 percent in 2016-17, even though many experts believe that the deceleration would be worse. There are signs of faltering investment and weak consumer spending over the last two months, caused by the economy-wide cash crunch.
India remains the world’s fastest growing major economy ahead of 6.7 percent growth in China that is battling an industrial slowdown, but question marks remain over its ability to hold on to that status following the demonetisation drive.
The Economic Survey’s GDP growth projections for 2017-18 and estimates for the current year (2016-17) will be one of most tracked topics as it would offer cues on how fast the government expects the economy to revive from the demonetisation-induced deceleration.
Universal Basic Income
The Economic Survey 2016-17 is widely expected to devote a full chapter arguing in favour of a universal basic income (UBI) scheme for the poor in India, an ambitious plan involving direct money transfers to identified families’ bank accounts.
A version of the UBI scheme was first tested in 2011 in a few districts of Madhya Pradesh and some households in the national capital’s West Delhi district. The government runs a string of state-funded poverty alleviation initiatives including the food-security plan and rural jobs scheme MGNREGS, but some of the rights-based welfare programmes have not achieved the desired results because of a leaky subsidy regime.
UBI, its advocates argue, will aid better targeting of subsidies and help people move out of poverty faster as they will receive money directly in their bank accounts. UBI, however, may face implementation hurdles given the scale of the programme. Also, it remains to be seen whether the Economic Survey pushes for replacing some of the existing poverty alleviation schemes with a UBI.
Black money
Black money is income not disclosed to the government to avoid paying taxes. About two-thirds of India’s GDP run on cash—about Rs 88 lakh crore a year. Also, about a third of India’s black money transactions are believed to be in real estate, followed by manufacturing and shopping for gold and consumer goods.
The surprise move to demonetise Rs 1000 and Rs 500 notes is part of the move to crack down on dirty money that moves through a web of transactions obscuring the audit trail.
There are no official estimates of India's black economy yet. The government-commissioned study by NIPFP, NCAER and NIFM has not be made public yet, although it is believed to have pegged the size of India's black economy at 25-30 percent of GDP or about Rs 40 lakh crore. The Economic Survey may offer an insight into the official estimates of India’s black economy and the current government’s strategy to deal with it.
JAM and BAPU
One contribution of the Economic Survey two years ago was to add the phrase ‘JAM’ — Jan Dhan, Aadhaar, Mobile — to the Indian policy lexicon. The ‘JAM agenda’ refers to the potential of largescale, technology-enabled, real-time cash transfers to improve the economic lives of the poor, and raise efficiency by reducing leakages and market distortions. Over the past year much progress has been made in spreading JAM across India’s economy, also because of the push towards digital payments following demonetisation.
Last year, the Economic Survey constructed an index to measure states’ preparedness to implement two varieties of JAM programmes: direct benefit transfer (DBT) and BAPU — Biometrically Authenticated Physical Uptake. BAPU differs from DBT in that there is no transfer of money. Beneficiaries simply authenticate their identities and physically collect benefits or subsidised goods as they do presently.
Several states seem better prepared for BAPU than Direct Benefit Transfer due to last-mile financial inclusion constraints. One may expect more on BAPU in this year’ Economic Survey.
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