Economic Report Card of India for FY2017-18: Elephant will dance in FY2018-19

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The year 2017 has been the year of reforms and developments in the Global economic landscape vis-a-vis emerging new economic stance in the United States, emerging protectionism in the advanced economies, recovery in Global trade; turn around in China’s economic growth and various geo-political issues.   Following the developments in the world, India faced several ups and down in FY 2017-18 in terms of implementation of novel Goods and Service Tax, improvement in global rankings such as Ease of Doing Business, Logistics Performance Index and Prosperity Index among others, openings of floodgates for FDIs, turmoil in Q2 GDP growth rate etc.

According to the second advanced estimates, GDP at constant prices is estimated to grow at 6.6% in FY2017-18, which implies that the Q4 GDP (to be released in May 2018) has to achieve the growth rate of 7% so as to attain the desired growth rate. The GDP growth rate of 6.6% in FY2017-18 though lesser than 7.1% in FY2016-17, however, the economy is poised to grow at 7.3% in FY2018-19 (as per World Bank forecast) and would compensate the teething effects of GST faced in FY2017-18 and is likely to improve the domestic flow of goods and services and contribute to the formalization of the economy and sustainably enhance growth.

As the New financial year commences, it is essential to look behind and track the performance of the previous year’s economic indicators in order to set new targets for the new India.

Fiscal deficit- Fiscal deficit swelled up to 120.3% in February 2018 as compared to 113.4% in February 2017 with a rise of Rs. 1,20,850 cr from the fiscal deficit target of target of Rs. 5,98,849cr for FY2017-18. The key reason for this rise in fiscal deficit can be linked with the increased expenditure and subdued non-tax revenue collections.

Direct tax collections- Direct tax collections represent a rosy picture in FY 2017-18 by registering at Rs 9.95 lakh cr and exceeding the revised budgetary target of Rs 9.8 lakh cr. Further, there is an increase of 17.1% in the net collections for FY 2017-18 over FY 2016-17. Also, income tax returns filed in this year signaled a rise of 26% by registering a figure of 6.84 cr ITR in FY2017-18 as against 5.43 cr in the previous year.

CPI – The consumer price index is under control as the inflation rate is registered at 3.5% in the period April –Feb 2018 which is 1.1% lesser than the cumulative inflation rate of 4.6% for the same period in the previous year.

IIP- Mixed trend is observed in the Index of Industrial Production starting from 3.2% in April 2017 to negative figure of (-)0.3% in June 2017 ‘ pre GST implementation era which lingered at 1% in July 2017. After destocking and as the teething effects of GST started disappearing, IIP boomed to 8.8% in November 2017. Although IIP reflected a positive picture towards the end of the FY 2017-18, however, in cumulative terms, IIP for the year 2017-18 stands at 4.1% in the period April-Jan 2018 lesser than 5% in the same period previous year.

Core Infra – Similar trend is observed in the growth trajectory of index of eight core industries starting from 5.2% in March 2017 declining to 1% in June 2017 due to drastic fall in the growth of coal industry. However, the trend revived in November 2017 to 6.9% mainly because of growth of cement industry at 17%, steel industry and petroleum and refinery products. In cumulative terms, core infra stands at 4.3% in the period between April-Feb 2018 lesser than 4.7% in the same period previous year due to fall in the growth rates of steel, fertilizer and coal industries among others.

External debt- At end-December 2017, India’s external debt stock stood at US$ 513.4 billion, recording an increase of US$ 41.6 billion (8.8 per cent) over the level at end-March 2017.The rise in external debt during the period was primarily due to the increase in commercial borrowings, NRI deposits and short term debt. On a sequential basis, total external debt at end-December 2017 increased by US$ 17.6 billion (3.6 per cent) from the end-September 2017 level.

Public Debt- The total Public Debt (excluding liabilities under the ‘Public Account’) of the Government increased to Rs. 66,61,038 cr at end-Dec 2017 from Rs. 65,80,599 cr at end-September 2017. This represented a quarter-on-quarter (QoQ) increase of 1.2 % (provisional) in Q3 FY 18 as compared with an increase of 2.8 % in Q2 of FY 18.

Trade- India’s merchandize exports exhibited high positive growth of 9.07% in January 2018 to value at USD 24.38 billion compared to USD 22.35 billion during January 2017. Cumulative value of exports for the period April-January 2017-18 stood at USD 247.89 billion as against USD 221.82 billion registering a growth of 11.75% over the same period last year. On the other hand, India’s merchandize imports witnessed expansion, growing by 26.1% to value at USD 40.68 billion in January 2018 compared to USD 32.261 billion during same period previous year. Cumulative value of imports for the period April-January 2017-18 was USD 379.05 billion as against USD 310.16 billion registering a growth of 22.21% over the same period last year.

In a nutshell, India’s GDP growth saw a temporary dip in the first quarter of FY 2017-18 due to disruptions surrounding the initial implementation of GST, however, the growth recovered owing to strong industrial growth. The macro-economic indicators though registered a mixed trend; however the appreciable part is that whenever economy faced a dip in its growth, significant efforts were taken to revive the growth trajectory.

Going ahead, the financial year 2018-19 is going to be very critical not just for the economic growth but also for the common man and businesses at large owing to the upcoming elections next year.