New Delhi: Finance Minister P Chidambaram tabled the Economic Survey 2012-13 in Parliament on Wednesday projecting 6.1 percent to 6.7 percent GDP growth in 2013-14 as the downturn is more or less over and the economy is looking up.
The Economic Survey 2012-13 predicts that the global economy is likely to recover in 2013 and various government measures will help in improving the Indian economy’s outlook for 2013-14.
Following the slowdown induced by the global financial crisis in 2008-09, the Indian economy responded strongly to fiscal and monetary stimulus and achieved a growth rate of 8.6 percent and 9.3 percent respectively in 2009-10 and 2010-11, but due to a combination of both external and domestic factors, the economy decelerated growing at 6.2 percent and an estimated 5 percent in 2011-12 and 2012-13 respectively, Economic Survey added.
While India’s recent slowdown is partly rooted in external causes, domestic causes are also important.
The slowdown in the rate of growth of services in 2011-12 at 8.2 percent, and particularly in 2012-13 to 6.6 percent from the double-digit growth of the previous six years, contributed significantly to slowdown in the overall growth of the economy, while some slowdown could also be attributed to the lower growth in agriculture and industrial activities.
But despite the slowdown, the services sector has shown more resilience to worsening external conditions than agriculture and industry.
For improved agricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role, private investment in infrastructure is stepped up, food price, food stock management and food distribution improves, and a predictable trade policy is adopted for agriculture.
FDI in retail allowed by the government can pave the way for investment in new technology and marketing of agricultural produce in India. Fast agricultural growth remains vital for jobs, incomes and food security.
The survey points out that the priority for the Government will be to fight high inflation by reducing the fiscal impetus to demand as well as by focusing on incentivizing food production through measures other than price supports.
But unlike the previous year, when food inflation was mainly driven by higher protein food prices, this year the pressure has been coming mainly from cereals.
On the Balance of Payments and External Position, the survey highlights that with net exports declining, India’s balance of payments has come under pressure.
Moreover, in the current fiscal, foreign exchange reserves have fluctuated between USD 286 billion and USD 295.6 billion, while the rupee remained volatile in the range of Rs 53.02 to Rs 54.78 per US dollar during October 2012 to January 2013. Here are the major highlights of the Economic Survey:Growth, Inflation
- WPI inflation may decline to 6.2-6.6 percent in March
- Lower inflation to create room for more rate cuts
- Growth downturn more or less over, economy looking up
- Rise in onion prices to put upward pressure on inflation
- Diesel price hike to put upward pressure on inflation
- April-December WPI average inflation 7.55 percent
- Non-food non-manufacturing inflation remains high
- Core inflation down on RBI action, fall in global prices
- Revival of investment in industry, infra key challenge
- Lower industrial growth due to sluggish investments
- Services sector shown more resilience than farm, industry
- Current environment difficult, future holds promise
- Revival of growth in advanced nations remains uncertain
- Fall in inflation to induce monetary easing by RBI
- Tight RBI policy lead to sharper than expected slowdown
- Shift in RBI's policy stance "desirable"
- Lower interest rates to give fillip to investments
- RBI should weigh cost of economic slowdown, high CPI inflation
- Set monetary policy based on behaviour of core inflation
- Monetary policy has limited influence on food prices
- Need to improve access to credit at lower cost
- FY13 fiscal situation shows sharp improvement over FY12
- Need to stay on path of indicated fiscal consolidation
- FY tax mop-up growth significantly lower than Budget aim
- Medium term fiscal consolidation plan credible
- Fiscal consolidation key to higher growth, lower inflation
- Oil subsidy key fiscal risk; need to address it
- Need to up diesel, LPG prices in line with global rates
- Need to accord priority to food subsidy
- Concerns that food security bill may push up subsidy
- Tax mop-up slippage can be lowered with additional efforts
- Controlling subsidy expenditure crucial
- Need to cut subsidy via better targeting, reducing leakage
- Direct cash transfer to cut leakage in subsidies
- Economic slowdown “a wakeup call” for stepping up reforms
- Recent government policy steps buoyed business sentiments
- Recent government steps to help improve Indian economic outlook FY14
- FDI in retail to pave way for investment in technology
- Widening trade, current account gaps matter of concern
- Current account gap reduction must focus on curbing imports
- Need to cut gold imports to cut current account deficit
- Room to increase exports limited in short run
- Must monitor overseas borrow to limit un-hedged FX exposure
- Import moderation may be limited despite gold import fall
- Increased dependence on foreign borrow of some concern
First Published: Wednesday, February 27, 2013, 08:23