Chief Economic Adviser Arvind Subramanian on Friday tabled the second volume of the Economic Survey for the financial year 2016-17, which stated that it will be difficult for the government to achieve real gross domestic product growth of 6.75%-7.5% in this financial year. These growth estimates were provided in the first volume of the survey released in February.
Friday’s survey noted that the economy is yet to gather its full momentum since a lot of factors such as the agricultural crisis, farm loan waivers and the bad loans problem in the banking sector continue to drag growth downwards.
“Also farm loan waivers could reduce aggregate demand by as much as 0.7 percent of GDP, imparting a significant deflationary shock to an economy,” the government’s press release on the survey stated.
It added that 5.4 lakh additional people have come under the tax net post-demonetisation, even as its impact on the informal economy hit those in under-developed states hard.
The survey also said that it is uncertain how the government’s own finances will play out during the current financial year. It noted that lower tax revenues, caused by slower industrial growth, could hamper government expenditure. Spending has, so far, proven to be one of the major drivers of economic growth as industrial activity remains subdued.
Additionally, the survey also stated that the reform agenda now includes implementing the Goods and Services Tax smoothly, privatising Air India and addressing the banking sector’s bad loans problem. The non-performing assets crisis has been exacerbated because the companies that took loans, which are now not being repaid on time, are not running to full capacity and facing losses.