Economic Survey 2014

Economic Survey has pegged that India’s GDP growth rate would be around 5.4% to 5.9% in the current financial year. Finance Minister Arun Jaitley has said that India’s fiscal situation is worse that it appears. He emphasized subsidy reforms for the consolidation of fiscal situation. 

The highlights of the economic survey are as follows:

Fiscal Deficit

• Recommended raising tax-to-GDP ratio for fiscal consolidation
• Shortfall in revenues can be contained through better mobilisation and reforms

Fiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP).

Growth

• Economic growth of 7-8 percent not seen before 2016/17
• Downward risk to economic growth due to poor monsoon, external factors

Inflation

• Government needs to move towards low and stable inflation through fiscal consolidation, wholesale Price Index (WPI) inflation expected to moderate by end-2014
• Consumer Price Index (CPI) inflation showing signs of moderation
• Needs to create a competitive national market for food

Inflation is defined as a sustained increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service

Current Account Deficit

• 2014/15 current account deficit may be contained to around $45 billion or to 2.1 percent of GDP

A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports. The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports. The current account is a calculation of a country’s foreign transactions, and along with the capital account is a component of a country’s balance of payment.

Subsidies
Rationalization of subsidies such as fertilizer and food essential, need to shift subsidy programme from price subsidies to income support

Taxation

• rnment needs to move towards simple tax regime, fewer tax exemptions and single rate of goods and services tax (GST)

The GST is an indirect tax that would replace existing levies such as excise duty, service tax and value-added tax (VAT). The states and the federal government will impose the tax on almost all goods and services produced in India or imported. Exports will not attract GST.

• ect Taxes Code (DTC) required to replace existing income tax laws; will reduce compliance costs and boost tax collection