This year’s Economic Survey contains the mid-term economic analysis that is usually presented in December. Just one day prior to the Economic Survey, the Finance Minister presented to Parliament the Medium-Term Expenditure Framework statement FRBM Act, 2003.
According to the Economic Survey, India has moved to a low inflation trajectory, given that current inflation at 1.5% is running well below the 4% target.
The data presented suggests that both the consumer price index (CPI) and the whole-sale price index (WPI) have risen quickly in July mainly due to food inflation and the housing index reflecting the 7th Pay Commission recommendations, and so did the core index. Analysts now expect the inflation to rest at the 4%, which is the RBI target.
Deflationary pressure generates from fiscal tightening by States due to Ujwal DISCOM Assurance Yojana (UDAY), farm loan waivers, declining profitability of some key sectors like power and telecom, the shadow of unresolved twin balance sheet problems and transitional issues of the GST. The key to Macroeconomic stability is continued fiscal rectitude and inflation targeting. The Economic Survey cautions policymakers of a possible deflationary cycle.