Indian Economy is an integral part of the UPSC syllabus. One cannot even dream of achieving success in UPSC exam by neglecting Economics. When it comes to Indian Economy, one of the primary sources of study is the yearly Economic Survey published by the Government. In the past, direct questions about the facts or information mentioned in the economic survey have been asked by UPSC. This is the reason why Economic survey is such an important aspect of the UPSC preparation. The Economic Survey 2017-18 is a must-read document for UPSC preparation.
In this blog, we have brought the Major reforms carried out by the Government of India in 2017. This information has been mentioned in the First Chapter of the Economic survey 2017-18. The following is a summary of the information given in the Economic survey
You can read the complete Economic Survey 2017-18 from here – http://mofapp.nic.in:8080/economicsurvey/
Major reforms of 2017 as per Economic Survey 2017-18:
1) GST (Goods and Service Tax): The GST Council was created as India’s most effective institutional mechanisms for cooperative federalism.
Cooperative Federalism: Also known as ‘Marble cake federalism’, is a concept of federalism in which national, state and local governments interact cooperatively and collectively to solve common problems, rather than making policies separately. It is not a substitute for state’s own efforts at furthering economic and social development, but a complement needed to tackle difficult structural reforms that involve states.
Cooperative federalism technology of the GST council could be used to:
- Create a common agricultural market.
- Integrate fragmented and inefficient electricity markets
- Solve interstate water disputes
- Implement direct benefit transfers (DBT)
- Make access to social benefits portable across states
- Combat air pollution
(2) Government Policy: Rationalize government resources by – Redirecting them away from subsidies, towards the public provision of essential private goods and services at low prices. For improving lives of poor and marginalized in a meaningful way:
- Providing bank accounts for implementing financial inclusion
- Toilet building ensure toilet usage
- Cooking gas need to ensure consistent gas offtake
- Village electrification ensure extensive household connections
(3) Twin Balance sheet problem resolution: Resolution of stressed companies was done under:
- New Indian Bankruptcy Code(IBC): Seeks to give the resolution to clean up the balance sheet, reduce debt.
- “Indian challenge-India has gone from Socialism with limited entry to marketism without exit”. The IBC technology seeks to resolve the above problem.
- The Financial Resolution and Deposit Insurance (FRDI) bill: Seeks to do the same work as IBC for the Financial firms.
- Recapitalization package to strengthen public sector banks. 4 Rs policy: Recognition, Resolution, Recapitalization, Reforms
(4) Vulnerabilities macro economical:
Fiscal Deficit, CAD: deteriorate as oil prices rise.
It is estimated that a $10 per barrel increase leads to:
- Reduced growth by 0.2 –0.3 percentage points.
- Increased WPI inflation by about 1.7 percentage points
- Worsened CAD by $9-10 Billion dollars
Overcoming fiscal vulnerabilities require: High tax to GDP ratio; which has remained the same since the 1980s. Despite average GDP growth of 6.5% being the most rapid in Indian history.
Overcoming fiscal vulnerabilities includes:
- The need to halt the conversion of contingent liabilities into actual ones- (of govt). (Example: through the assumption of state Disom debts and PSB recapitalization).
- Contingent liabilities have added 5 % of GDP to total govt debt since 2000-2001.
- Raise in export growth.
- Reviving manufacturing and making it internationally competitive. Example: Goals of Make in India helped through the strategy of reducing costs of doing business.
- Share of manufacturing in GDP has increased.
- Ratio of manufacturing export to GDP has decreased
- Ratio of Manufacturing export to GDP has decreased
- Manufacturing trade balance has decreased
Real effective exchange rate (REER): appreciated around 2% since 2014 due to struggle with the “International Trilemma”. (REER – is the weighted average of a country’s currency relative to an index or basket of other major currencies, adjusted for the effects of inflation. The weights are determined by comparing the relative trade balance of a country’s currency against each country within the index)
International trilemma is the struggle to choose between the following three and maintaining the balance of all three:
- Independent monitory policy
- Objective exchange rate
- Open Capital Account
The above are the reforms with respect to Indian economy mentioned in the Economic Survey 2017-18. We hope this blog about Major reforms of 2017 as per Economic Survey 2017-18 is helpful in your UPSC preparation. We will continue to provide further information given in the Economic survey 2017-18 through our blogs in future as well to assist your preparation of UPSC 2018.