SECTION 1: PERFORMANCE IN 2016—17

The important growth and fiscal indicators as per the latest advance estimates (AE) of the CSO, we find the following signals for the year 2016–17—

Growth rate: Growth rate at 7.1 per cent—with a likelihood of downward revisions. The gross value added (GVA) growth rate at ‘constant basic prices’ is estimated at 7.0 per cent, which was 7.2 per cent for the previous year. Sectoral growth rate estimates—Agriculture to grow at 4.1 per cent; industry by 5.2 per cent and services by 9.2 per cent.

GFCF: Fixed investment (GFCF-gross fixed capital formation) to GDP ratio (at current prices) is estimated to be 26.6 per cent (was 29.3 per cent in 2015– 16). Fixed investment (at constant prices) estimated to decline to (–) 0.2 per cent (from 3.9 per cent of 2015–16 (it has been declining since 2011–12).

Consumption: Government final consumption expenditure (GFCE) estimated to grow by 23.8 per cent—the major driver of GDP growth. Private

consumption is also projected to grow at a reasonable pace—contraction expected due to declining imports of gold, silver and other bullion, acquisition of valuables by households. Steeper contraction in imports, compared to exports, during the first half of 2016–17 led to a sharp decline in trade deficit. Despite slowing services exports, the decline in merchandise trade deficit helped improve the position of net exports of goods and non- factor services in the national accounts.

Fiscal developments: Fiscal consolidation continues with an estimated fiscal deficit of 3.5 per cent in the year (down from 3.9 per cent of the previous year)—strengthened by increases in ‘non-debt receipts’ (consisting of net tax revenue, non-tax revenue and non-debt capital receipts—estimated to grow by 25.8 per cent (higher than the budget estimates of 16.4 per cent). Estimates of growth rates of ‘receipts’ are—21.5 per cent for gross tax revenue; 33.6 per cent for tax revenue (net to centre); 1 per cent for non-tax revenue and 57.1 per cent for non-debt capital. The growth in ‘revenue expenditure’ seems very high—due to three main reasons—

(i) Salary component increased by 23.2 per cent (close to the budget target);

(ii) Major subsidies grew by 5.0 per cent (budget target was about a decline of 5.9 per cent)—21.6 per cent growth seen in the food subsidy.

(iii) Increase of 39.5 per cent in the ‘grants for creation of capital assets’ (GoCA)—all grants given to the states and UTs are treated as revenue expenditure, but a part of these grants are used for creation of capital assets.

Central government’s liabilities (composed of internal debt, other internal liabilities like provident funds, small savings, etc. and external debt) estimated to grow by around 10 per cent (almost same as last two years) though it was budgeted to have a growth of only 7.9 per cent.