Highlights of the Economic Survey 2016-17 Volume-2 (Download PDF)

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The fiscal outcome in 2016 - 17 marked by strong growth in tax revenue, sustenance of the pace of capital spending and a consolidation of non-salary and pension revenue expenditure- containing fiscal deficit to 3.5 per cent of GDP in 2016 - 17.

Economic Survey 2016 - 17 Volume 2: Analysis with Key Terminologies
  • The Union Budget for 2017 - 18 opted for a gradual fiscal consolidation path: the fiscal deficit is expected to decline to 3.2 percent of GDP in 2017 - 2018. The fiscal deficit target of 3 per cent of GDP under the FRBM framework is projected to be achieved in 2018 - 19.
  • The Budget for 2017 - 18 introduced number of procedural reforms:
    • the integration of the Railway Budget with the Union Budget
    • advancing of the date of the Union Budget to February 1, almost by a month
    • elimination of the classification of expenditure into ‘plan’ and ‘non-plan’
    • restructuring of the Medium Term Expenditure Framework Statement with projected expenditures (revenue and capital) for each demand for the next two financial years
  • Introduction of the Goods and Services Tax with effect from the 1st July 2017, encompassing several central and state indirect taxes transforming Indian markets and the economy.
Economic Survey 2016 - 17 Volume-2

Monetary Management and Financial Intermediation

  • The Reserve Bank of India cut the policy rate by 50 basis points during 2016 - 17. However, it shifted its monetary policy stance from accommodative to neutral in February 2017. As of August 2017 Repo rate stood at 6.00 per cent and reverse repo rate at 5.75 per cent.
  • Monetary aggregates decelerated significantly following the withdrawal of legal tender status of specified bank notes on November 9,2016. As of 31st March 2017, currency in circulation contracted by 19.7 per cent whereas reserve money contracted by 12.9 per cent.
  • Credit off-take from banks continued to decelerate. During 2016 - 17, gross bank credit outstanding grew at around 7 per cent on an average. The average gross bank credit to industry contracted by 0.2 % .
  • Sluggish growth and increasing indebtedness in some sectors of the economy impacted the asset quality of banks causing concern. The gross non-performing advances (GNPAs) ratio of SCBs rose from 9.2 per cent in September 2016 to 9.5 per cent in March 2017.
  • Financial inclusion is proceeding apace under the Pradhan Mantri Jan Dhan Yojana. Zero balance accounts under PMJDY declined consistently from nearly 58 per cent in March 2015 to around 24 per cent as of December 2016.

Prices and Inflation

  • Significant moderation in CPI headline inflation during the last three years- fell to a series low of 1.5 percent in June 2017.
  • Broad decline in all commodity groups during 2016 - 17, the most significant being decline in food.
  • Food inflation declined significantly during the year because of improvements in supply of pulses and vegetables on the back of a normal monsoon. Core inflation declined in the last few months.
  • Convergence between CPI and WPI inflation in the last few months.
  • Most States witnessed sharp decline in CPI inflation in 2016 - 17.
  • Both rural and urban inflation have declined in 2016 - 17
  • Gap between rural and urban inflation narrowed down in recent months.

Climate Change, Sustainable Development and Energy

  • India ratified the Paris Agreement on 2nd October 2016- India՚s actions post-2020 period based on its Nationally Determined Contribution (NDC) .
  • India՚s NDC targets:
    • Lower emissions intensity by 33 - 35 per cent of GDP by 2030 from 2005 levels
    • Increase share of non-fossil based power generation capacity to 40 per cent of installed electric power capacity (cumulative) by 2030
    • Create an additional carbon sink of 2.5 - 3 Gt CO2e through forest and tree cover by 2030.
  • International community writing “Paris rule book” with guidelines and modalities for the implementation of the Paris Agreement
  • At national level, the roadmap for India՚s NDC is being prepared through an Implementation Committee and six Sub-Committees elaborating their respective NDC goals and identifying specific policies and actions aimed at achieving them.
  • India has ambitious targets in renewable energy with largest renewable energy expansion programme in the world. 5-fold increase in the overall renewable energy capacity to 175 GW by 2022 - 100 GW of solar, 60 GW of wind, 10 GW of biomass, and 5 GW of small hydropower capacity.
  • Urgent need to increase the access of the poor to more efficient energy through Pradhan Mantri Ujjwala Yojana, PAHAL scheme, Deen Dayal Upadhyaya Gram Jyoti Yojana.
  • India requires fast grow rate to lift the large number of their citizens from below the poverty line and from energy deprivation levels. SDG 7 ensures access to affordable, reliable, sustainable, and modern energy for all.
  • Social cost analysis of coal and renewables based power indicates higher social costs for renewables. Storage costs and stranding of assets based on coal-based power are major costs associated with the renewable power. Given that first goal for India is to provide 100 per cent energy access and bridge development deficit gap through all possible energy sources.
  • Initiatives in the Indian financial sector for renewable energy segment include:
    • Bank loans of up to ₹ 15 crore for solar-based power generators
    • Biomass-based power generators, windmills, micro-hydel plants, etc. considered part of Priority Sector Lending. The
    • External Commercial Borrowing (ECB) norms liberalized for green projects.
    • The Securities and Exchange Board of India (SEBI) put in place a framework for issuance of green bonds.

External Sector

  • India՚s balance of payments situation further improved in 2016 - 17due to low and falling trade and current account deficits and moderate and rising capital inflows, resulting in further accretion of foreign exchange reserves.
  • With slowly improving world economic situation, India՚s exports turned positive at 12.3 per cent in 2016 - 17 after an interregnum of two years. This along with a marginal decline in imports by 1.0 per cent narrowed the trade deficit to US $ 112.4 billion (5 per cent of GDP) in 2016 - 17 as compared to US $ 130.1 billion (6.2 per cent of GDP) in 2015 - 16.
  • The current account deficit (CAD) narrowed down to 0.7 per cent of GDP in 2016 - 17 from 1.1 per cent of GDP in 2015 - 16 led by sharp contraction in trade deficit which more than outweighed a decline in net invisibles earnings.
  • Net capital inflows was slightly lower at US $ 36.8 billion (1.6 per cent of GDP) in 2016 - 17 as compared to US $ 40.1 billion (1.9 per cent of GDP) in the previous year, mainly due to fall in NRI deposits.
  • Gross FDI inflows increased significantly to US $ 60.2 billion in 2016 - 17 from US $ 55.6 billion in 2015 - 16.
  • In 2017 - 18 (April-June) there was double digit export growth at 10.6 per cent.
  • Among the major economies with current account deficit, India has second largest foreign exchange reserves after Brazil.
  • Average monthly exchange rate of the rupee against the US dollar appreciated continuously from February to June 2017 with rupee performing better than other EME-currencies in 2016 - 17.
  • During 2016 - 17 on an average Indian rupee depreciated by 2.4 per cent against the US dollar. Against a basket of 6 and 36 currencies, rupee depreciated 0.5 per cent and 0.1 per cent, respectively. However, in terms of the real effective exchange rate (REER) against a basket of 6 and 36 currencies, it appreciated 2.7 per cent and 2.2 per cent, respectively.
  • Most external debt indicators of India improved at March 2017 compared to March, 2016. India՚s aggregate external debt stood at US $ 471.9 billion registering a decline of US $ 13.1 billion (2.7 per cent) . The ratio of external debt to GDP fell to 20.2 per cent from 23.5 per cent. Foreign exchange reserves covered 78.4 percent of external debt.
  • World trade growth projected at 3.8 per cent and 3.9 per cent in 2017 and 2018 and India՚s trade growth also picking up.

Agriculture and Food Management

  • Small and declining average farm size is a major limitation to reap the benefits of economies of scale.
  • The progress in agriculture evaluated in terms of outcomes such as global yields of various crops.
  • Credit is important input to improve productivity- predominance of informal credit sources is concerning especially regional disparity in the distribution of agricultural credit.
  • Key challenges to horticulture sector include post-harvest losses, availability of quality planting material and lack of market access for produce.


  • Industrial performance moderated from 8.8 percent during 2015 - 16 to 5.6 percent in 2016 - 17.
  • Industrial growth per Index of Industrial Production (IIP) grew at 5 percent in 2016 - 17 as compared to 3.4 percent last year.
  • Index of Eight Core Industries growth during 2016 - 17 was 4.8 percent compared to 3.0 percent in 2015 - 16.
  • The Government in 2016 introduced Minimum Import Price (MIP) to counter dumping of steel. Imports of steel by India have declined by 36.2 percent while exports have risen by 102 percent in 2016 - 17.
  • The apparel sector is a highly employment intensive industry especially for women- Post ₹ 6,000 crore special package for textile & apparel sector there has been a marked rise in clothing exports.
  • The measures taken by the Government resulted in FDI equity inflow of 43.4 Billion USD in Financial Year 2016 - 17- highest ever FDI Equity inflows.


  • India far ahead of emerging economies in providing qualitative transportation related infrastructure.
  • During 2016 - 17, Indian Railways registered freight earnings at ₹ 104339 crore (P) , registered a negative growth of 4.5 per cent over 2015 - 16 due to carrying larger volume of low fare freight in the year
  • Domestic airlines have low share in international traffic to and from India due to factors like foreign airlines utilizing the 6th freedom of the air, expansion of capacity entitlements under bilateral air service agreements with foreign countries, lower utilization of India՚s own capacity entitlements, the 0 ⁄ 20 rule and fleet constraints.
  • UDAY scheme for financial turnaround of power distribution companies to refinance total outstanding debt of ₹ 3.82 lakh Cr
    • National average (all UDAY states) of AT&C loss has come down to 20.2 per cent in FY 2017 from 21.1 per cent in FY 2016
    • Billing efficiency has been increased by 2 per cent from 81 per cent in 2015 - 16 to 83 per cent in 2016 - 17
    • 15 states have issued tariff-revisions for FY 2017 - 18.
  • Under Smart Cities Mission, 57 projects worth ₹ 941 crore have completed. An estimated 462 projects worth ₹ 15307 crore likely to be completed through 2018.

Services Sector

India՚s services sector growth has been showing moderation in recent times.

  • Services sector is key driver of India՚s economic growth, contributing almost 62 per cent of its gross value added growth in 2016 - 17.
  • Growth moderated to 7.7 per cent in 2016 - 17 compared to 9.7 per cent in previous year
  • Higher than the other two sectors and at the top among the 15 major economies.
  • Services growth moderation mainly due to deceleration in growth in two services categories:
  • Trade, hotels, transport, communication, and services related to broadcasting (7.8 per cent)
  • Financial, real estate & professional services (5.7 per cent) .
  • FDI equity inflows to the services sector in 2016 - 17 (top 15 services) declined.
  • India՚s and world՚s services export trend growth was almost flat in the pre-crisis period, while in the post-crisis period, the deceleration in trend growth of India՚s services was sharper than world.
  • In 2016 - 17, services exports recorded a growth of 5.7 % especially in transportation, business services and financial services and travel. Software services exports, accounting for around 45.2 per cent of total services, declined by 0.7 per cent.
  • The performance of India՚s services sector subdued in 2016 - 17 except some services which continued to be drivers of India՚s economic growth- telecom with increase in telecom connections reflecting the Jio effect, aviation particularly domestic travel, tourism related services particularly in terms of foreign exchange earnings, and even information technology-business process management (IT-BPM) despite fall in growth in computer software.
  • As per the Ministry of Tourism data, Foreign Tourist Arrivals (FTAs) during 2016 grew by 9.7 per cent and Foreign Exchange Earnings (FEEs) through Tourism, grew by 8.8 per cent. Initiatives taken by the Government to promote tourism include e-Visa for the citizens of 161 countries, promotion of India as a 365 days destination, launching of Multilingual Tourist Infoline, and Swachh Paryatan Mobile App.
  • In 2016 - 17 India՚s total revenue of the IT-BPM sector including and excluding hardware expected to touch US $ 154 billion and US $ 140 billion, with growths of 7.8 per cent and 8.1 per cent respectively.
  • Real estate sector accounted for 7.6 per cent share in India՚s overall GVA in 2015 - 16. The growth of this sector decelerated in the last three years from 7.5 per cent in 2013 - 14 to 6.7 per cent in 2014 - 15 and further to 4.5 per cent in 2015 - 16.
  • Satellite mapping and launching services earned India more than ₹ 100 crores in last 5 years. Foreign exchange earnings from export of satellite launch services increased noticeably in 2015 - 16 and 2016 - 17.

Social Infrastructure, Employment and Human Development

  • Deterioration in quality learning in primary education sector and achievement of targeted enrolment level in the middle education poses challenge
  • Employment a great challenge in terms of its structure dominated by informal, unorganized, and seasonal workers and characterized by under employment, skill shortages, with labour markets impacted by rigid labour laws, and the emergence of contract labour.
  • The health sector faces many challenges due to declining role of public delivery of health services, high Out of Pocket (OoP) expenses on health and issues of accessibility and affordability of health services.
  • Swatch Bharat Mission had remarkable progress. Cleanliness and Open Defecation Free (ODF) drive resulted in significant decline open defecation- estimated at less than 35 crores.

- Published/Last Modified on: August 28, 2017


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