India, The macroeconomic context Dr. Rathin Roy Director and Chief Executive National Institute of Public Finance and Policy, New Delhi June, 2016

Predicting Growth in India Year GDP Actual IMF_projections ADB_projections WB_projections 2004 7.1 6.3 6.6 8.3 2005 9.5 6.9 9.2 2006 9.6 7.2 2007 9.3 8.1 7.8 8.8 2008 6.7 8.0 2009 8.6 6.5 7.4 2010 8.9 7.6 2011 8.2 7.5 2012 5.6 7.0 6.8 2013 6.0 2014 5.7 5.9 6.4 2015 2016 7.3 Source: The Actual GDP numbers for India are based at 2004-05 prices till 2013. FY’ 2014, FY’2015 are at 2011-12 prices

Macroeconomic Outlook- growth and inflation Growth (GVA at basic prices) CPI Inflation Source: MoF, GoI Source: Reserve Bank of India

Macroeconomic stabilization achieved in last two years 210 bps 350 bps 100 bps $ 19 Bn Source: MoF, GoI Source: Reserve Bank of India

Macroeconomic stabilization achieved in last two years Source: MoF, GoI

Macroeconomic Outlook- key deficit indicators- Centre (% of GDP) 2013-14 2014-15 2015-16 RE 2016-17 BE Revenue Deficit 3.1 2.9 2.5 2.3 Fiscal Deficit 4.4 4.1 3.9 3.5 Revenue Expenditure 12.1 11.8 10.9 11.5 Capital Expenditure 1.7 1.5 1.6 Source: Budget documents, Union Budget of Government of India

Fiscal deficit (as % of gdp)- action lies in the states States have completed fiscal consolidation. Source: Handbook of statistics on Indian economy, RBI

Revenue deficit (as % of gdp) States no longer borrow to consume. Source: Handbook of statistics on Indian economy, RBI

Revenue deficit (as % of gSdp) States 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 Andhra Pradesh 2.3 1.0 2.5 1.8 1.6 1.1 0.0 Bihar 1.9 7.1 5.2 4.1 3.8 1.7 -1.4 -0.1 Gujarat 2.7 3.3 5.7 5.4 2.2 2.0 0.2 Kerala 3.6 4.3 4.7 3.1 Madhya Pradesh 3.7 1.3 4.4 -1.5 Maharashtra 3.0 2.4 0.8 Orissa 6.4 6.0 0.7 -0.6 Punjab 4.6 4.0 3.5 Rajasthan 3.2 0.5 Tamil Nadu 2.9 0.9 0.3 -0.8 Uttar Pradesh 5.3 8.2 0.4 West Bengal 4.2 6.9 5.6 5.1 4.8 3.9 All GCS 3.4 Source: Handbook of statistics on Indian economy, RBI

Revenue deficit (as % of gSdp)- action lies in the states 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15*(RE) 2015-16 *(BE) Andhra Pradesh -0.9 0.0 -0.2 -0.3 -0.4 -0.5 -0.07 2.74 1.25 Bihar -2.5 -4.1 -3.1 -1.8 -1.9 0.2 -1.87 1.12 -2.63 Gujarat -0.6 -0.7 1.6 1.0 -0.62 -0.74 Madhya Pradesh -2.3 -3.2 -2.1 -2.4 -2.6 -1.7 -1.35 -1.25 -1.00 Maharashtra -0.1 -2.2 0.9 0.1 0.34 0.82 Odisha -3.3 -2.0 -1.2 -1.22 -1.09 -1.47 Rajasthan -0.8 0.4 1.8 0.20 0.73 -0.08 Tamil Nadu -1.3 0.7 0.5 0.22 0.32 0.42 Uttar Pradesh -1.5 -1.0 -1.17 -3.32 -3.20 Kerala 1.7 2.2 1.4 2.6 2.85 2.07 1.37 Punjab 2.5 2.7 2.3 2.06 1.78 1.60 West Bengal 3.2 4.3 5.4 3.7 2.1 2.68 1.29 0.00 All GCS 0.3 *RE=Revised Estimates *BE= Budget Estimates; NA= Not Available

Public Investment “*” : For states, 2015-16 data is Budget Estimates

Macroeconomic vision of the government Source: MoF, GoI

Implementation- FISCAL CONSOLIDATION Adhering to fiscal deficit targets Reviewing the implementation of FRBM Act High quality of spending Doing away with Plan-Non Plan classification Sunset date and outcome review of new schemes

Implementation-Transforming tax ecosystem Reducing litigation and uncertainty – Reducing discretionary tax officers, Dispute Resolution Scheme, CBEC withdrew ~7, 500 old cases for small taxpayers, etc. Commitment to not resort to retrospective taxation Incentivizing Make in India, Affordable Housing, and pensioned society

implementation- sustainable agriculture

Implementation- manufacturing growth

implementation- sustainable development Mass Rapid Transit Systems projects implemented for cities including Ahmedabad, Bengaluru, Chennai, Chandigarh, Hyderabad, Delhi, Jaipur, Lucknow, Kochi, Kolkata, Patna, Pune, Surat through PPP model. Multiple ring road projects to decongest cities.

implementation- infrastructure through public investment

implementation- robust financial system

implementation- transparent tax regime Biggest indirect tax reform since 1947, leading to efficient economic integration of India. 99% will be approved in the monsoon session of the Parliament of India. Revitalised systems/technology in tax administration with online tax filing facility and fast refund processing. Refunds less than Rs. 50,000 approved automatically resulting in faster processing. Single window clearance for customs. Simplification of tax code and filing process. New appraisal system for tax officials with increased focus on quality and less on meeting tax collection targets. Dispute Resolution Scheme to reduce pending tax cases.

Achievements- governance reforms

Execution , Execution, Execution Road ahead Execution , Execution, Execution

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