DSIJ Mindshare

Economic Survey 2017: India's demographic dividend to peak in 5 years

In Tuesday's Budget session, the Economic Survey 2017, tabled by Union Finance Minister Arun Jaitley and authored by Chief Economic Advisor (CEA) Arvind Subramanian, pointed out that the growth boost from the demographic dividend is likely to peak within the next five years, as India's working age population plateaus. However, there is no cause for panic as India may not see the sharp deceleration in growth experienced by the East Asian countries because its working age ratio will fall much more gradually than in other countries. 

Evidence from satellite data indicates that Bengaluru and Jaipur collect only between 5 to 20 per cent of their potential property taxes. The CEA discussed the near-term economic impact of demonetisation and explained why the GDP forecast has such a wide range. According to the CEA, the seven biggest achievements of the government are: GST, Bankruptcy Bill, MPC, Aadhaar, FDI reforms, UPI and promoting labour-intensive industries. "I will focus on what are the most pressing issues. I will review developments, discuss near-term outlook and outline impact of demonetisation. Despite the economic impact of demonetisation, FCNR outflows and the US elections, India's macros continue to remain stable," the CEA added.

As per the Survey, the non-performing assets (NPAs) of the banking system, especially public sector banks, have kept increasing, while credit and investment continued to fall. This graph indicated that it was time to consider a different approach, that is, set up a centralised public sector asset rehabilitation agency (PARA) that could take charge of the largest, most difficult cases, and make politically tough decisions to reduce debt. The Survey, pointed out that the gross NPAs have climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016. 

The Economic Survey also highlighted difficulties in privatising public sector enterprises, even for firms where economists have made strong arguments that they belong to the private sector. In this context, the Survey highlighted the need to further privatise the civil aviation, banking and fertiliser sectors.

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