Economic Survey 2016-2017 Crux for IAS Exam: The Review of GDP
The IAS aspirants should not ignore such study materials for IAS Prelims Exam and IAS Mains Exam. The Economic Survey is very lengthy and quite exhaustive to read and understand. Here, for the convenience of the IAS aspirants, we are providing the crux of every chapter given in the Economic Survey 2016-17.
The Review of GDP of the Indian Economy
- The previous year’s Economic Survey 2015-16 had predicted that the Indian economy will achieve the growth rate in the range of 7 to 7.75 percent during the financial year 2016-17.
- As per the estimates released by CSO, the economy has accelerated as per the expectations and registered the growth of 7.2 percent in the first half of the financial year 2016-17.
- Earlier, it was speculated that the Indian economy will experience a slowdown in the growth rate that could be lower than the CSO’s first advance estimates due to the huge demonetisation drive in which the higher currency notes of Rs. 500 and Rs. 1000 were wiped out from the circulation in the economy.
- The first advance estimate came in early January 2017 which does not reflect the effects of demonetisation because the available data for the estimates were of the period before the demonetisation taken place.
- As per the first advance estimate (AE), the growth rate of gross value added (GVA) at constant basic prices for 2016-17 is placed at 7.0 per cent, as against 7.2 per cent in 2015-16.
- The growth in the second half of 2016-17 is estimated at 6.7 per cent as against 7.2 per cent in the first half (Figure 1).
- In a sector-wise growth, the agriculture & allied sectors improved significantly in 2016-17 following the normal monsoon in the current year, which was preceded by sub-par monsoon rainfall in 2014-15 and 2015-16.
- There should not be a surprise to see the higher growth in agriculture; rabi sowing so far and the first advance estimates of the Kharif crop production for the year attest to this.
- The industrial sector registered the growth of 7.4 per cent in terms of value added in 2015-16 comprising mining & quarrying, manufacturing, electricity, gas & water supply, and construction sectors moderated in 2016-17.
- While it is tandem with the moderation in manufacturing, mostly on account of a steep contraction in capital goods, and consumer non-durable segments of Index of Industrial Production (IIP).
- The contraction in mining and quarrying facilitates the slowdown, which came in the production of crude oil and natural gas, but the performance of the industrial sector in terms of value added is likely to be at variance with its achievements based on IIP.
- As in the previous years, the dominant contributor was the services sector to the overall growth of the economy led by a significant pick-up in public administration, defence & other services that were boosted by the payouts of the Seventh Pay Commission and consequently, the growth in services in 2016-17 is estimated to be close to what it was in 2015-16.
- Fixed investment (gross fixed capital formation (GFCF)) to GDP ratio (at current prices) is estimated to be 26.6 per cent in 2016-17, vis-à-vis 29.3 per cent in 2015-16.
- The growth in fixed investment at constant prices declined from 3.9 per cent in 2015-16 to (-) 0.2 per cent in 2016-17.
- Fixed investment rate has been declining since 2011-12 and this trend has to be reversed for medium to long-term growth prospects.
- Being aware of the need to boost investment and growth, the Government, in coordination with the Reserve Bank of India and other stakeholders, has taken a number of steps to improve the ease of doing business and to improve the balance sheet positions of banks and firms.
Recent Review of Growth Performance (GDP) of Indian Economy
- As per the CSO, India’s GDP growth during the third quarter of the current financial year 2016-17, will be 7 per cent, which assisted India the country to retain the tag of the fastest growing major economy in the world while China has recorded GDP growth of 6.8 per cent for the same period.
- Another data from CSO states that the GDP growth for the entire financial year 2016-17 would be 7.1 per cent, down from 7.9 per cent estimated for 2015-16.
- The real GDP in 2016-17 is likely to attain a level of Rs 121.65 lakh crore, against the first revised estimate of GDP for 2015-16 of Rs 113.58 lakh crore, released on January 31, 2017.
- The growth in gas, water supply and other utility services is estimated to be 6.6 per cent.