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Overview and Outlook for Policy: Economic Survey 2016 - 17 Volume 2 found a rekindled optimism due to structural reforms such as launch of the GST, positive impacts of demonetization, decision to privatize Air India, rationalization of energy subsidies and determination to address the Twin Balance Sheet (TBS) challenge contribute to this optimism. Following are important findings:

Economic Survey 2016 - 17 Volume 2: Analysis with Key Terminologies

Dr. Manishika Jain discusses Economic Survey 2016 - 17: Analysis with Key Terminologies. The idea is to have conceptual understanding of the various terms used in economics

• Growing confidence in macro-economic stability due to government and RBI actions and structural changes in the oil market reducing risk of sustained price increases.
• Anxiety because of a series of deflationary impulses weighing on an economy- stressed farm revenues, as non-cereal food prices have declined, farm loan waivers and the fiscal tightening, and declining profitability in the power and telecommunication sectors.
• India might not undergo shift toward low inflation with oil market imparting a downward bias to oil prices. In addition, farm loan waivers would reduce aggregate demand by as much as 0.7 percent of GDP, imparting deflationary shock to an economy.
• Increase in new tax payers and reported income after demonetization- 5.4 lakh new tax payers. Demonetization increased demand for social insurance.
• MGNREGS provides social safety net but sustaining current growth trajectory requires action on investment and exports and cleaning up of balance sheets to facilitate credit growth.
• Ratio of stressed companies in the power sector steadily rising this year, reaching 70 percent, with an associated vulnerable debt of over Rs. 3.6 lakh crore.
• Telecommunications sector has “renewables shock” as a new entrant has dramatically reduced prices and increased access to data benefitting consumers- after launching of services average revenue per user (ARPU) for the industry has come down by 22 percent.
• Outlook for Growth 2017 - 18- Survey (Volume I) forecast a range for real GDP growth of 6.75 percent to 7.5 percent for FY 2018.
• Outlook for Prices & Inflation 2017 - 18- inflation in the near-term determined by factors like:

• The outlook for capital flows and exchange rate- in turn influenced by the outlook and policy in advanced economies, especially the US
• Nominal exchange rate appreciation
• Monsoon
• Introduction of the GST
• 7th Pay Commission awards
• Farm loan waivers
• Output gap
• Current inflation running below the 4 percent target- inflation by March 2018 is likely to be below the RBI’s medium term target of 4 percent.

## Review of Economic Developments 2016 - 17

• Real economy grew by 7.1 per cent in 2016 - 17 compared with 8 percent the previous year- higher than range predicted in the Economic Survey (Volume I) in February.
• Economy was relatively resilient to the large liquidity shock of demonetization which reduced cash in circulation by 22.6 percent in the second half of 2016 - 17.
• Resilience was strong because both nominal GVA and GDP growth accelerated by over 1 percentage point in 2016 - 17 compared with 2015 - 16.
• Annual inflation averaged 5.9 per cent in 2014 - 15 and has since declined to 4.5 per cent in FY 2017.
• During 2016 - 17 inflation declined sharply from 6.1 percent in July 2016 to 1.5 percent in June 2017.
• Sharp dip in WPI inflation in late FY 2015 and throughout FY 2016 owed to the deceleration in global commodities prices, especially crude oil prices. With global commodity prices recovering wholesale inflation perked up during FY 2017
• External position robust with merchandise trade recovering, and robust capital flows- leading to rising reserves and a strengthening exchange rate.
• Current account deficit narrowed in 2016 - 17 to 0.7 percent of GDP, down from 1.1 percent of GDP the previous year
• Export growth turned positive after two years and imports contracted marginally- trade deficit narrowed to 5.0 per cent of GDP (US$billion) in FY 2017 as compared to 6.2 per cent (US$130.1 billion) in the previous year.