New Delhi: This is the fifth report card of the Narendra Modi government सिर्फ़ News is publishing as the country approaches the third anniversary of this dispensation. Under this government, the key initiatives of the Arun Jaitley-led Department of Economic Affairs, Ministry of Finance, taken in the past 3 years have led to an improvement in India’s macroeconomic stability. Thanks to the economic policies of the Modi government, “Modinomics” if one may, India is one of the bright spots among the major countries in the subdued global economic context. India recorded a growth of 7.9% in 2015-16, as compared to 7.2% in 2014-15 and 6.5% in 2013-14. Predictions by expert agencies suggest that India’s growth rate is set to improve further in 2017-18.
In terms of the Global Competitiveness Index (GCI) prepared by World Economic Forum for 138 countries, India ranked 39 in 2016-17, as compared to India’s rank in GCI of 60 (among 148 countries) in 2013-14.
During the last 3 years, the Indian economy has made an improvement in macroeconomic stability on the strength of the following indicators, Table 1.
Table 1: Improvement in macroeconomic stability
|2011-12 to 2013-14 (3 year Average)||2014-15 to 2015-16 (2 year Average)||2016-17 *|
|Inflation CPI (NS)||9.8||5.4||4.6|
|CAD (% of GDP)||-3.6||-1.2||-0.7|
|GDP growth (%)||6.0||7.6||7.1|
|World GDP growth (%)||3.7||3.3||3.1|
|Foreign exchange reserves (USD Bn)||296.9||350.9||362.8|
|Net FDI ($billion)||21.1||33.6||21.3|
|Fiscal Deficit (% of GDP)||5.1||4.0||3.5|
|* For 2016-17, CPI inflation till February, WPI inflation till Dec 2016, CAD till December 2016, Net FDI till H1 2016-17, foreign exchange reserves till February, GDP growth is as per 1st advance estimate and fiscal deficit is budget estimate 2016-17|
Modinomics’ fiscal scenario
The fiscal situation of India has become comfortable, with the fiscal deficit as a ratio of GDP steadily declining from 4.5% in 2013-14. The fiscal deficit of the Modi government as a ratio of GDP was 4.1% in 2014-15, 3.9% in 2015-16 and 3.5% for 2016-17 (revised estimate). The fiscal deficit is budgeted to be 3.2% of GDP in 2017-18.
The present government took charge in May 2014 in the backdrop of persistently high inflation, particularly the food inflation. Astute food management and price monitoring by the government in the last 3 years helped control the stubbornly persistent inflation. CPI inflation remained under control for the third successive financial year. The average CPI (combined) inflation declined from 9.5% in 2013-14 to 5.9% in 2014-15 and 4.9% in 2015-16. It declined further to 4.6% in the current financial year, up to February and stood at 3.7% in February backed by sharp fall in food inflation. Food inflation based on consumer food price index (CFPI) which was in double digits during 2012-2014 declined to 6.4% in 2014-15 and 4.9% in 2015-16. It declined further to 4.4% in the current financial year, up to February and stood at 2.0% in February.
The government, in consultation with the Reserve Bank of India (RBI), has also fixed the inflation target of 4% with a tolerance level of ±2% for the period beginning from 5 August 2016 to 31 March 2021.
India’s trade deficit was highest at $190.3 billion in 2012-13. However, it declined by 13.8% to $118.7 billion in 2015-16 which was lower than the level of $137.7 billion in 2014-15. During 2016-17 (April-February), trade deficit decreased to $95.3 billion as against $114.3 billion in the corresponding period of the previous year.
The inflow of foreign direct investment increased from $43.6 billion 2013-14 to $51.8 billion in 2014-15 and further to $59.5 billion in 2015-16. During 2016-17 (April-December), net FDI was $31.2 billion as compared to $27.2 billion in 2015-16 (April-December).
Balance of Payment
India’s external sector position has been comfortable, with the current account deficit (CAD) progressively contracting from $88.2 billion (4.8% of GDP) in 2012-13 to $22.2 billion (1.1% of GDP) in 2015-16. On a cumulative basis, the CAD narrowed to 0.7% of GDP in April-December 2016 from 1.4% in the corresponding period of 2015-16 on the back of the contraction in the trade deficit.
Foreign exchange reserves
Foreign exchange reserves touched an all-time high level of $371.9 billion in end-September 2016. The current position is at a comfortable level to cushion the exchange rate volatility from any international macroeconomic uncertainty.
At end-September 2016, India’s external debt stock stood at $484.3 billion, recording a decline of $0.8 billion (0.2%) over the level at end-March 2016.
Most of the key external debt indicators show an improvement in September 2016. The share of short-term debt in total external debt decreased to 16.8% at end-September 2016 from 17.2% at end-March 2016. India’s foreign exchange reserves provided a cover of 76.8% to the total external debt stock at end-September 2016 vis-à-vis 74.3% at end-March 2016.
India continues to be among the less vulnerable nations in terms of its key debt indicators which compare well with other indebted developing countries. According to the World Bank’s “International Debt Statistics, 2017” which gives external debt data of developing countries for 2015, the ratio of India’s external debt stock to gross national income (GNI) at 23.4% was the fifth lowest. In terms of the cover provided by foreign exchange reserves to external debt, India’s position was sixth highest at 69.7%.
Agriculture and food management
As per the Second Advance Estimates of National Income released on 28 February, the growth rates in Gross Value Added (GVA) of the agriculture and allied sectors were at 4.4% in 2016-17, 0.8% in 2015-16, (-) 0.2% in 2014-15. As per the second Advance Estimates of production of foodgrains released by Ministry of Agriculture & Farmers Welfare on 15 February, production of total foodgrains during 2016-17 is estimated at 271.98 million tonnes compared to 251.57 million tonnes in 2015-16 (Final) and 252.02 million tonnes in 2014-15.
As per the Second Advance Estimates of National Income 2016-17 released by the CSO on 28 February, the growth rates in Gross Value Added (GVA) of the industrial sector were 5.8% in 2016-17, 8.2% in 2015-16 and 6.9% in 2014-15.
The index for 8 core industries (comprising crude oil, natural gas, petroleum refinery products, coal, electricity, cement, steel, and fertilisers) registered 4.8% growth in 2016-17 (April-January) as compared to 3.4% in 2015-16 and 4.5% in 2014-15.
With the introduction of UDAY scheme in power sector in 2015, most of the States have made significant efforts to reduce AT&C losses. The scheme has already addressed 62% of the DISCOMs’ debt that existed at the end of 2014-15.