Summary: Economic Survey & Union Budget (2017-18)- 1 | RBI Grade B Phase 1 Preparation - Bank Exams PDF Download

Economic Survey & Union Budget 2017-18

Q.1. Economic survey 2016-2017 has projected the growth of the Indian economy in 2017-18 to what range?
(a) 6.5-7.5 percent
(b) 6.25-7.25 percent
(c) 6.2-7.2 percent
(d) 6.75-7.25 percent
Ans: (d)

Explanation:

• The survey was prepared by CEA in Finance Ministry, Arvind Subramaniam. 
• The survey projects a growth rate of 6.75 to 7.25 percent in the fiscal 2017-2018.
• This marks the transitional adverse impact of demonetisation on GDP growth.

Highlights of Economic Survey 2016-2017

➢ Growth Forecast

• Gross domestic product (GDP) growth in 2016-17 pegged at 6.5%, down from 7.6% in last fiscal 2015-16.
• Economic growth to rebound to 6.75 to 7.5% in 2017-18.
• Farm sector to grow at 4.1% in 2016-17, up from 1.2% in 2015-16.
• Growth rate of industrial sector estimated to moderate to 5.2% in 2016-17 from 7.4% in 2015-16.
• Service sector is estimated to grow at 8.9% in 2016-17 GST, other structural reforms should take the growth rate trend to 8-10%.

Demonetisation:
• The adverse impact of demonetisation on GDP growth will be transitional.
• It will affect growth rate by 0.25-0.5%, but to have long-term benefits
• It may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.
• Remonetisation will ensure that the cash squeeze is eliminated by April 2017.

Universal Basic Income (UBI):
• Advocates the concept of UBI as an alternative to the various social welfare schemes in an
effort to reduce poverty.
• It will be alternative to plethora of state subsidies for poverty alleviation. UBI would cost between 4 and 5% of GDP

Taxation:
• Prescribes cut in individual Income Tax rates, real estate stamp duties.
• IT net could be widened gradually by encompassing all high income earners.
• Time table for cutting corporate tax should be accelerated.
• Tax administration could be improved to reduce discretion and improve accountability.

Goods and Services Tax (GST):
• Fiscal gains from GST will take time to realise.

Fiscal Deficit:
• Implementation of muted tax receipts, wage hike to put pressure on fiscal deficit in 2017-18.
• For fiscal health of the economy fiscal prudence for both centre and states is needed.
• Fiscal windfall from low oil prices to disappear in 2017-18.

Inflation:
• The average consumer price index (CPI) inflation rate declined to 4.9% in 2015-16 from 5.9% in 2014-15.
• CPI-based core inflation remained sticky around 5% in the 2016-17.
• Oil prices, seen rising by one-sixth in 2017-18 over the previous fiscal 2016-17 prices which could dampen India’s economic growth.

Monetary Policy:
• Monetary easing headroom may be capped due to sharp rise in prices in 2017-18.
• Market interest rates seen lower in 2017-18 due to demonetisation.

Government Debt to GDP ratio:
• It was 68.5% in 2016, down from 69.1% in 2015.

Banking:
• Suggests setting up public sector asset rehabilitation agency (PSARA) to take charge of large
bad loans in banks.
• With government backing, PSAR can overcome coordination and political issues on bad
loans.

Q.2. According to the Economic Survey, what is India's rank in wind power installations?
a. 3rd
b. 4th
c. 5th
d. 6th

Ans. (b)

• India has attained the fourth position globally in installed wind power capacity.
• It is after China, US and Germany as a result of various steps in the right direction, the Economic Survey said.
• With the legal framework in place for the International Solar Alliance (ISA) by Prime Minister Narendra Modi and launched during the UN climate summit in Paris, ISA will be a "major" international body headquartered in India.
• It said that currently, India's renewable energy sector is undergoing transformation with a target of 175 GW of renewable energy capacity to be reached by 2022.

In order to achieve the target, the major programmes on implementation of:
• Solar Park
• Solar Defence Scheme
• Solar scheme for Central Public Sector Undertakings.
• Solar photovoltaic (SPV) power plants on canal bank and canal tops, solar pump, solar rooftop among others have been launched.
• A capacity addition of 14.30 GW of renewable energy has been reported during the last two and half years under Grid Connected Renewable Power.
• This includes 5.8 GW from Solar Power, 7.04 GW from Wind Power, 0.53 GW from Small Hydro Power and 0.93 GW from Bio-power.
• On October 31, 2016, India achieved 46.3 GW grid-interactive power capacity, 7.5 GW of grid-connected power generation capacity in renewable energy.
• It also has small hydro power capacity of 4.3 GW.
• Besides this, 92,305 solar pumps were installed and Rs 38,000 crore worth of Green Energy Corridor is being set up to ensure evacuation of renewable energy.
• With India's initiative, ISA envisaged as a coalition of solar resource-rich countries to address their special energy needs, will provide a platform to collaborate.
• It will focus on addressing the identified gaps through a common and agreed approach.

ISA: Know More
• 24 countries have signed the Framework Agreement of ISA after it was opened for signature
on November 15, 2016.
• ISA is expected to become inter-governmental treaty-based organization.
• It will be registered under Article 102 of the UN charter after 15 countries ratify the Agreement.
• With legal framework in place, ISA will be a major international body headquartered in India

3) What is PARA, as per the Economic Survey 2016-2017?
 a. Public Sector Assets Reconstruction Agency
b. Public Sector Asset Rehabilitation Agency
c. Public Sector Additional Reconstruction Association
d. None of the above

• To tackle with the problems of increasing Non-Performing Assets (NPAs) of the banking system and declining credit and investment, the Economic Survey 2016-17 on recommended a centralised Public Sector Asset Rehabilitation Agency (PARA).
• PARA will aim to look at the largest, most difficult cases, and make politically tough decisions to reduce debt.
• As per the Survey, gross NPAs have climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016.
• At this level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia.
• The consequent squeeze of banks has led them to slow credit growth to crucial sectors especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades.
• As this has occurred, growth in private and overall investment has turned negative.
• A decisive resolution is urgently needed before the ‘Twin Balance Sheet’ problem becomes a serious drag on growth.
• Public discussion of the bad loan problem has focused on bank capital.
• A far more problematic issue is that of finding a way to resolve the bad debts.
• “Some debt repayment problems have been caused by diversion of funds.
• But the vast majority has been caused by unexpected changes in the economic environment after the Global Financial Crisis.
• This caused timetables, exchange rates, and growth rate assumptions to go seriously wrong.
•  This concentration creates a challenge since large cases are difficult to resolve, but also an opportunity.
• The large debtors have many creditors, with different interests.
• A professionally-run central agency with the government backing could overcome the coordination and political issues that have impeded progress so far.

4) Economic Survey 2017-2018 has stated that cash supply replenishment will restore economy to
__________
 

a. Normal
b. Average
c. Deficit
d. None of the above

1. The Indian economy will recover in 2017-18 after the cash supply is replenished post demonetisation.
2. Following the demonetisation of Rs. 1,000 and old Rs. 500 notes, country’s gross domestic product (GDP) is expected to grow in the range of 6.75-7.5 per cent, the Economic Survey 2016-17 tabled on 31st Jan 2017 said.
3. Demonetisation led to temporary slowdown in the GDP growth.
4. Economy will reap benefits in terms of increased digitalisation, greater tax compliance and a reduction in real estate prices.
5. This could increase long-run tax revenue collections and GDP growth.
6. The Survey, however, said the cash squeeze will have significant implications for the GDP, reducing 2016-17 growth by ¼ to ½ percentage points compared to the baseline of 7 percent.
7. The GDP may not be able to gauge the impact of demonetisation on the informal sector.
8. The Survey illustrated a sector-wise impact of demonetisation.
9. It stated demonetisation led to job losses, decline in farm incomes and social disruption, especially in cash intensive sectors.
10. According to the Survey, the weighted average price of real estate in eight major cities, which was already on a declining trend, fell further after demonetisation was announced on November 8.
11. The Survey suggested a few measures to maximise long term benefits and minimise shortterm costs due to demonetisation:
12. One such is fast remonetisation and especially, free convertibility of cash to deposits including through early elimination of withdrawal limits.
13. This would reduce the GDP growth deceleration and cash hoarding.
14. Land and real estate should be brought under the Goods and Services Tax following demonetisation.

Demonetisation: Know More
• On 8 November 2016, the Government of India announced the demonetisation.
• This was of all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes of the Mahatma Gandhi Series.
• The government claimed that the action would curtail the shadow economy.
• It would also crack down on the use of illicit and counterfeit cash to fund illegal activity and
terrorism.

5) Economic Survey 2016-2017 is the first to use __________.
a. Big Data
b. Analytics
c. Econometrics
d. Statistics

• For the first time, the Economic Survey has used Big Data Analysis to shed new light on the flow of goods and people within India.
• Survey produces first estimate of the flow of goods across states within India, based on analyzing transactions level data provided by the Goods and Services Tax Network (GSTN),
• Survey furnishes exciting new evidence on the flows of migrants within India.
• This is based on detailed origin-destination passenger data provided by the Ministry of Railways and on a new methodology for analysing the Census data.
• This year’s Economic Survey does not carry the usual statistical tables on the economy’s performance.
• The survey seems to have compensated this by the use of Big Data and intensive datamining of multiple datasets.
• The survey has used individual tax filings administered by the Goods and Service Tax Network to estimate state-level (both inter and intra) trade.
• Railway station-wise unreserved passenger traffic data provided by the Indian Railways has been used to arrive at estimates of work-related migration.
• Satellite imagery has been used to calculate built-up area and estimate potential property tax collections (and hence losses being incurred).
• Machine generated large scale data sets have been used more intensively. NSSO statistics has been used to generate insights on spatial concentration of poverty and welfare beneficiaries.
• Official statistical machinery has moved past surveys to include administrative data.
• The new approach towards using diverse datasets is definitely an important first step towards better decision-making.
• Marrying satellite imagery about properties data with something like income tax data for India’s top 50 cities and house-size census data can generate rich insights about Indian cities.

6) New estimates of labour migration in India show it was more pronounced for _________
a. Females
b. Males
c. Elderly workers
d. None of the above
 

• New estimates of labour migration in India have revealed that inter-state labor mobility is significantly higher than previous estimates.
• This was stated in the Economic Survey 2016-17.
• The study based on the analyses of new data sources and new methodologies also shows that the migration is accelerating and was particularly pronounced for females.
• The data sources used for the study are the 2011 Census and railway passenger traffic flows of the Ministry of Railways and new methodologies including the Cohort-based Migration Metric (CMM) .
• The new Cohort-based Migration Metric(CMM) shows that inter-state labor mobility averaged 5-6.5 million people between 2001 and 2011.
• This is yielding an inter-state migrant population of about 60 million and an inter-district migration as high as 80 million.
• The first-ever estimates of internal work-related migration using railways data for the period 2011-2016 indicate an annual average flow of close to 9 million migrant people between the states.
• Both these estimates are significantly greater than the annual average flow of about 4 million suggested by successive Censuses and higher than previously estimated by any study.
• Migration for work and education is also accelerating.
• There is also a doubling of the stock of inter-state out migrants to nearly 12 million in the 20- 29year old cohort alone.
• Higher growth and a multitude of economic opportunities could therefore have been the catalyst for such an acceleration of migration.
• Language does not seem to be a demonstrable barrier to the flow of people.
• Fourth, the patterns of flows of migrants found in this study are broadly consistent with what is expected - less affluent states see more out migration migrating out while the most affluent states are the largest recipients of migrants.

Policy actions to sustain and maximize the benefits of migration include:

• Ensuring portability of food security benefits,
• Providing healthcare and a basic social security framework for migrants - potentially through an inter-state self-registration process.
• Redistributive Resource Transfer and the Economic Survey
• Economic Survey also calculates Redistributive Resource Transfers’ (RRT) from the Centre (between 1994 and 2015) and value of natural resources for Indian States (over 1980 and 2014).
• It correlates these with several economic outcomes and an index of governance.
• Redistributive Resource Transfer or RRT to a state (from the Centre) is defined as gross devolution to the state adjusted for the respective state’s share in aggregate Gross Domestic Product(GDP).

The top 10 recipients are:

• Sikkim,
• Arunachal Pradesh,
• Mizoram,
• Nagaland,
• Manipur,
• Meghalaya,
• Tripura,
• Jammu and Kashmir
• Himachal Pradesh
• Assam.

7) According to the Economic Survey, what is relevant to Universal Basic Income?
a. JAM: Jan Dhan, Aadhar and Mobile
b. Centre-state negotiations for program cost sharing
c. Both of the above
d. Neither of the above
• The Economic Survey 2016-17 tabled in Parliament today by the Union Finance Minister Shri
Arun Jaitley has advocated the concept of Universal Basic Income (UBI).
• This is as an alternative to the various social welfare schemes in an effort to reduce poverty.
• The survey juxtaposes the benefits and costs of the UBI scheme.
• The Survey says the UBI, based on the principles of universality, unconditionality and agency,
is a conceptually appealing idea.
• Economic Survey points out that the districts where the needs are greatest are precisely the
ones where State capacity is the weakest.
• This suggests that a more efficient way to help the poor would be to provide them resources
directly, through a UBI.

Exploring the principles and prerequisites for successful implementation of UBI, the Survey points
 out that the two prerequisites for a successful UBI are:
 

a. functional JAM (Jan Dhan, Aadhar and Mobile) system as it ensures that the cash transfer goes
directly into the account of a beneficiary

b. Centre-State negotiations on cost sharing for the programme.
• The Survey says that a UBI that reduces poverty to 0.5 percent would cost between 4-5 percent of GDP.
• This is assuming that those in the top 25 percent income bracket do not participate.
• On the other hand, the existing middle class subsidies and food, petroleum and fertilizer subsidies cost about 3 percent of GDP.

8) What is the tax slab for zero tax rate?
 a. Upto INR 3 lakhs
b. Between INR 5 and 10 lakhs
c. Between INR 3 and 5 lakhs
d. None of the above

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• Good impact of Direct Benefit Transfer scheme in LPG.
• Citizens in far-flung, isolated regions find it tough to obtain passports, therefore, head post offices will now be used as front offices.
• A Centralised Defence Travel System will be in place where tickets can be booked by soldiers and officers easily in a hassle-free manner.
• For Public Servants, it will now become easy to get recruitment in a central government office. A 2-tier system of examination will be there.
• Introduction of a legislative changes will be there for all the economic offenders who are fled the country through confiscation of their property.
• Web-based pension distribution system put in place for defense pensioners.
• Union Government will celebrate Champaran Satyagraha centenary in the year 2017.

10) Union Budget 2017 has pegged fiscal deficit for 2017-2018 as?
 a. 3.2 percent
b. 3.3 percent
c. 3.4 percent
d. 3.5 percent

Union Budget: Fiscal Expenditure
 Budget 2017 identified and found fiscal expenditure as one of the key drivers of the economy. As
per the budget, FM Arun Jaitley indicated following initiatives:
 

• Fiscal deficit for 2017-18 estimated at 3.2 per cent of GDP.
• The total resources being transferred to the States and the UTs with Legislatures is INR 4.11 lakh crore in 2017-2018, as against INR 3.60 lakh crore in 2016-2017.
• The allocation for Scientific Ministries has risen to INR 37435 crore in 2017-18.
• The Revenue Deficit of 2.3 per cent in BE 2016-17 fell to 2.1 per cent in the Revised Estimates.
• The Revenue Deficit for 2017-18 is estimated at 1.9 per cent, against 2 per cent as per the FRBM Act.
• Commitment has been made to achieve 3 per cent fiscal deficit in the fiscal year 2018-19.
• A provision of INR 3000 crore has been allocated the DEA to implement various Budget announcements and other New Schemes in 2017-18. The total expenditure for 2017-18 has been pegged at INR 21.47 lakh crore.
• The allocation for Capital expenditure has been increased by 25.4 per cent over the previous year with the aim of fiscal consolidation.
• A sum of INR 274114 crores, including INR 86488 crores for Defence capital, has been sanctioned for Defence expenditure. This excludes pensions.

11) Which is the fourth budget of the Modi Government and the 87th budget?
a. Budget 2015
b. Budget 2016
c. Budget 2017
d. Budget 2018

This fourth budget of the Modi sarkar and the 87th budget in Independent India was presented on
Feb 1, 2017.

The Budget 2017 is the first budget after introducing key changes to the budget process namely:
• Combining of the Rail Budget with the General Budget,
• Eliminating the classification of plan and non plan expenditure
• Moving the budget presentation date by one month.
• Making the base year for indexing 2001
• The Budget 2017 has identified financial sector as a leading driver of the Indian economy.
• The Finance Minister announced that the Foreign Investment Promotion Board (FIPB) will be phased-out in the coming fiscal. Bill will soon be tabled in Parliament to protect the poor and vulnerable investor.
• More 90 per cent of the total FDI inflows are now through the automatic route.
• It is also proposed to allow systemically important NBFCs regulated by RBI and above a certain net worth, to be known as as Qualified Institutional Buyers (QIBs) by SEBI at equivalence with the banks and insurance companies.
• The threshold limit for audit of business entities that opt for presumptive income scheme has been stepped up from INR 1 crore to INR 2 crore.
• The threshold for the maintenance of books for individuals and HUF is proposed to rise from turnover of INR 10 lakhs to INR 25 lakhs or income from INR 1.2 lakhs to INR 2.5 lakhs.
• The Foreign Portfolio Investor (FPI) Category I and II will be exempted from indirect transfer provision as per the IT Act.
• A common application form for registration, opening of bank and demat accounts, and issue of PAN cards will be launched for Foreign Portfolio Investors/FPIs.
• Also, high net worth NBFCs can also now participate in IPOs akin to the the banks and insurance companies.
• The commodities and securities derivative markets will be further integrated by uniting the participants, brokers, and operational frameworks.
• The shares of Railway Public Sector Enterprises (PSEs) like IRCTC, IRFC, IRCON and others will be listed in stock exchanges.
• The individual insurance agents will be exempted from the TDS provision of 5 per cent being deducted from commission payable. This is after filing a self-declaration that their income is below taxable limit.
• The budget target under the Pradhan Mantri Mudra Yojana (PMMY) has been increased by double to INR 2.44 lakh crores.
• INR 10000 crores has been set aside for recapitalisation of Banks in 2017-18. The Finance Minister also given need based additional allocation.
• Also on the anvil is an integrated public sector ‘oil major,’ which will be able to match the performance of international and domestic private sector oil and gas companies.

12) How much has been allocated for the infrastructure sector for 2017-2018?
a. INR 3,96,314
b. INR 3,96,134
c. INR 3,96,124
d. INR 3,96,214

• Union Finance Minister Arun Jaitley announced a total allocation of INR 3,96,134 crore for the infrastructure sector for the year 2017-2018.
• For transportation sector, including rail, roads, shipping, Budget 2017 provides INR 241387 crores in 2017-18.

Road Sector:
• The Budget allocation for the sector has been increased for Highways from INR 57976 crores in BE 2016-17 to INR 64900 crores in 2017-18.
• Furthermore, 2000 kms of coastal connectivity roads have been selected for construction and development to improve and better connectivity with ports and remote villages.
• The total length of roads, including those under Pradhan Mantri Gram Sadak Yojana (PMGSY), built from 2014-15 till the present year is around 140000 kilometres, which is significantly higher than previous three years.

Civil Aviation infrastructure:
• The select airports in Tier 2 cities will be taken up for operation and maintenance in the
Public Private Partnership mode.
• The AAI Act will be amended to enable effective monetization of land assets. The resources
will be utilized for upgradation of airports.

Telecom sector:
• The allocation for the BharatNet Project has been stepped up to INR10000 crores in 2017-
2018.
• Also, 155000 kms of Optical Fiber Cables have been laid. By the close of of 2017-2018, high
speed broadband connectivity on optical fiber will be present in more than 150000 gram
panchayats, with WiFi hot spots and access to digital services at affordable tariffs.
• A DigiGaon initiative will be launched to provide tele-medicine, education and skills through
digital technology.

Railways:
For 2017-18, the total capital and development expenditure on Railways has been estimated at INR
131000 crores. This includes INR 55000 crores as provided by the Union Government.

As per the Finance Minister, the Railways will focus on four major areas:
• Passenger safety,
• Capital and development works,
• Cleanliness, and
• Finance and accounting reforms.
• Railway lines of 3500 kms will be commissioned in 2017-18, as against 2800 kms in the previous fiscal.
• 500 stations will be made accessible to differently-abled by providing lifts and escalator.
• Service charge on e-tickets booked through IRCTC has been taken back. Cashless reservations has risen from 58 per cent to 68 per cent.
• A new Metro Rail Policy will be put in place with focus on innovative models of implementation and financing, along with standardization and indigenization of hardware and software.
• The ‘Coach Mitra’ facility, a single window interface for registering all coach related complaints and requirements, is to be launched.

Energy sector:
• The Union Government has taken the decision to set up Strategic Crude Oil Reserves.
• In the first phase, 3 such Reserve facilities have been established. It is proposed that these will be set up at 2 more locations, namely, Chandikhole (Odisha) and Bikaner (Rajasthan), during the second phase.
• This will bring the India’s strategic reserve capacity to 15.33 MMT.
• The Finance Minister also suggested to create an integrated public sector oil major, which will match the global standards.
• Announcement for the second phase of Solar Park development was also proposed to be taken up for extra 20000 MW capacity.
• Allocation for incentive schemes like M-SIPS and EDF have been considerably increased to an all-time high of INR 745 crores in 2017-18.
• Further, a new and restructured Central scheme, called Trade Infrastructure for Export Scheme (TIES) will be launched in 2017-18 to aim for export infrastructure in a competitive world.

13) Union Budget 2017 has introduced SANKALP which stands for?
 Skill Acquisition and Knowledge Awareness for Livelihood Promotion Programme
 Highlights of Education, Employment and Skill Development
• Quality education will energise Indian youth.
• Annual Learning Outcomes will be the basis for allocation of resources.
• Emphasis will be on science education.
• Innovation fund for secondary education to boost local innovation including ICT enabled transformation.
• Focus on educationally backward areas
• UGC reform will be taken up.
• Revised framework will be in place for outcome based accreditation.
• SWAYAM to online courses access will be widened with Direct to Home channel.
• National Testing Agency, an autonomous body will be created.
• AICTE will also focus on administration
• PM Kaushal Kendras will be extended to different areas.
• In 2017-2018, SANKALP programme will be launched with focus will be on vocational training.
• Industry Cluster Approach will be adopted and 5 Special Tourism zones will be set up.

SANKALP and STRIVE
• The Finance Minister said that in 2017-18, a programme SANKALP (Skill Acquisition and Knowledge Awareness for Livelihood Promotion Programme) will be launched.
• It will be at a cost of INR 4,000 crore.
• SANKALP will provide market relevant training to 3.5 crore youth.
• Next phase of skill strengthening for industrial value enhancement (STRIVE) will be launched in 2017-18 at a cost of INR 2,200 crore.
• STRIVE will focus to improve on the quality and the market relevance of vocational training provided in ITIs.
• It will strengthen the apprenticeship programme through industry-cluster approach.