Economic Survey 2016-2017 – Part 2

Saturday, August 26th, 2017

The 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 is the second post out of three that cover charts and tables from Volume 1. Subsequently we will do posts on Volume 2.

 

1. India’s demographic dividend

Economic Survey
India is one of the few countries globally that has structurally positive demographics. While most countries are facing the challenge of ageing populations, we have what is called a “demographic dividend”. From the report:

“Table 3, based on the methodology in Mody and Aiyar (2011), calculates the estimated demographic dividend for India (the additional growth due to demographic factors alone) for the previous decade and for the next four. The magnitudes peak in 2011-20 at 2.6 percentage points and start declining thereafter. The incremental growth boost in the 2020s, for example, is estimated to be about 1.8 percentage points. In other words, India will approach, within four years, the peak of its demographic dividend. (Note: this does not mean that the demographic dividend will turn negative; rather, the positive impact will slow down.)”

 

2. Ambivalence about private sector and property rights

Economic Survey
From the report:

“All states, all societies have some ambivalence toward the private sector. After all, the basic objective of private enterprises – maximizing profits – does not always coincide with broader social concerns, such as the public’s sense of fairness. But the ambivalence in India seems greater than elsewhere. Figure 6 ranks countries on the attitude of the people toward the private sector in a select group of countries. It appears that that India has distinctly anti- market beliefs relative to others even compared to peers with similarly low initial GDP per capita levels. “

The Survey goes on to give examples of this by citing cases of privatizing public sector enterprises like Air India and legacy policy distortions particularly in the fertilizer and agriculture sectors.

 

3. India’s low tax base

Economic Survey
Figure 11 shows how few India’s income taxpayers number relative to the voting age population, especially when compared to other countries, and how slowly this ratio has risen over time

 

4. Infrastructure sectors slow turnaround

Economic Survey
Most of the indicators on infrastructure activities are starting to show expansion. Particularly, the government’s focus on power, ports, roads and railways seems to be paying off

 

5. Budget allocation for schemes

Economic Survey

“There are about 950 central sector and centrally sponsored sub-schemes in India accounting for about 5 percent of the GDP by budget allocation (Figure 1). A large majority of these are small in terms of allocation with the top 11 schemes accounting for about 50 percent of total budgetary allocation. As is seen in Figure 1, Food Subsidy or Public Distribution System (PDS) is the largest programme followed by Urea Subsidy and the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS).”


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.

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