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Economic Survey 2016-2017 – Part 1
Saturday, August 19th, 2017The Economic Survey 2016-17 is out and is full of interesting charts and figures that take a macro view of the Indian economy. While Volume 2 was the document was recently published, we thought it would be interesting to do a series of posts featuring charts that are there in both Volume 1 and 2.
This first post is full of charts that take a step back and view the bigger macro themes playing out in the Indian Economy over the last few years.
1. The fall of core inflation
If we take a step back, core inflation has been in a structural decline over the last five years. While core inflation is still refusing to fall below 4 per cent, it is well within the comfort range of the MPCs target range and that is a big positive.
2. Falling current account balance
Similarly, falling oil prices combined with a government that has shown resolve in trimming wasteful subsidies and leakages has meant that the macro environment has shown tremendous improvement. The current account has substantially improved over the last five years.
3. Falling USD Remittances
However a slowing global economy is having knock-on effects to private remittances to India:
Net private remittances declined by USD 4.5 bn in the first half of 2016- 17 compared to the same period of 2015-16, weighed down by the lagged effects of the oil price decline, which affected in flows from the Gulf region
4. Improving Fiscal Deficit at the centre but increasing deficits at the states
While the central fiscal deficit is showing encouraging trends, things are a bit more troubling at the state level. According to the report:
State government finances are under stress (Figure 6b). The consolidated deficit of the states has increased steadily in recent years, rising from 2.5 percent of GDP in 2014-15 to 3.6 percent of GDP in 2015-16, in part because of the UDAY scheme
and finally,
5. The switch in petrol from subsidised to highly taxed
According to the survey, the increase in petrol tax has been over 150 per cent in India! This is justified on the basis of climate change, but I am guessing it has more to do with fiscal arithmetic.
Since June 2014, when international oil prices started declining, India has increased its excise duties from Rs 15.5 per litre to Rs 22.7 per litre as of December 2016 for branded petrol and from Rs 5.8 per litre to Rs. 19.7 per litre for branded diesel
More charts next week in Part 2!
About the author
Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.
