The survey also made a case for reducing GST compliance burden and asked the government for more centralised procedures.
The Survey said that the capital flows and exchange rate in turn will be influenced by the outlook and policy in advanced economies, especially the United States, the recent nominal exchange rate appreciation, the monsoon, the introduction of the GST, the 7th Pay Commission awards, likely farm loan waivers and the output gap. Since February 2017, the rupee has appreciated by about 1.5 percent.
" CPI inflation by March likely to remain below 4 per cent". "The macro-economic challenge will be to counter the deflationary impulses through key monetary, fiscal and agricultural policies", the survey said, adding that sustaining the current growth trajectory will require action on more normal drivers of growth such as investment and exports and cleaning up of balance sheets to facilitate credit growth.
Farm loan waivers, which total Rs 1.25 lakh crore for states that have already announced such measures, could reach Rs 2.7 lakh crore if all states were to implement it. As percentage to GDP, the expenditure on social services was at 7.4 per cent during the fiscal.
Drafted by Chief Economic Advisor Arvind Subramanian, the survey was tabled in the Parliament by Finance Minister Arun Jaitley in the Lok Sabha on the last day of the monsoon session. It said the government is committed to achieving SDG for health that ensures healthy lives for all at all ages by 2030.
The Survey said Farm loan waivers could reduce aggregate demand by as much as 0.7 percent of GDP, imparting a significant deflationary shock to an economy.
The survey called for a further drop in interest rates - now at 6 percent after a 25 basis points cut last week.
The Economic Survey said that a number of indicators- GDP, IIP, credit, investment and capacity utilisation, point to a deceleration in real activity since first quarter of 2016-17 and a further deceleration since the third quarter. "While developments such as introduction of the Goods and Services Tax (GST), in principle decision to privatise Air India, steps taken to address the twin balance sheet problem and the continuous roll out of reforms across segments lend confidence, there is an element of anxiety on account of factor such as farm loan waivers, dip in non-cereal food prices and weakening performance of sectors such as power and telecommunications", FICCI stated. "So relative to the past, there is now uniformity rather than multiplicity as well as considerably less complexity", the survey said. Also, nominal GDP growth has accelerated post demonetisation.
Faster monetary easing, the ministry argued, would help deleverage corporate balance sheets and restore banks' profits, helping the economy realise its full potential.