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Economic Survey: Recovery on fast-track; inflation, deficit major concerns

Updated on Thursday, February 25, 2010, 11:13 Print Email
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Zeebiz Bureau

New Delhi: Finance Minister Pranab Mukherjee Thursday tabled a cautious but optimistic Economic Survey 2009-10 in Parliament, which predicted 7.2 percent growth for the current fiscal and a full recovery in 2011-12, while remaining concerned over inflation and fiscal deficit.

The Survey said Indian economy is well on a recovery track and is expected to expand by 8.25-8.75 percent in 2010-11 and even exceed 9 percent the year after.

"It is entirely possible for India to move into the rarefied domain of double-digit growth and even don the mantle of the fastest-growing economy in the world within the next four years," said the survey tabled by Finance Minister Pranab Mukherjee in the Lok Sabha, a day ahead of the federal budget.

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Industrial output in 2009-10 is estimated to be an upbeat 8.2 percent, according to the Survey

However, the government said inflation is a concern for the next few months and the recovery needs to be watched closely before taking a decision on the stimulus.

"As of now the outlook for inflation is conditioned by supply-side pressures in the near term," it added.

Survey Highlights


  • Economy seen growing 8.25-8.75 % in 2010-11
  • Economy expected to return to 9% growth in medium term
  • India FY11 growth seen 100 bps more than FY10
  • Medeum term prospects of economic growth “really strong”
  • India could be fastest growing economy in next four years
  • Expect GDP growth to breach 9% mark in 2011-12
  • Risk of second dip recession in advanced nations
  • India seems to be returning to pre-crisis growth rate
  • India medium, long-term growth prospects excellent
  • No reason why India can’t achieve double-digit growth
  • Clear Sign of recovery in industrial output
  • Largely contained risk to growth from poor monsoon

    Food Prices

  • Food subsidy must be given directly to households
  • Food coupons must replace existing PDS system
  • Must identify poor for effective food coupon system
  • Possible to switch to food coupons system by 2012
  • India has ample stocks of wheat, rice
  • Wheat prices may moderate on hope of better harvest
  • Vegetable prices started to ease on rabi crop arrival
  • Food suibsidy must be given directly to households
  • Food coupons must replace existing PDS systems


  • Concern of higher than expected inflation in coming months
  • Rapidly rising food inflation cause for concern
  • WPI inflation in FY10 out of sync with trend in previous years
  • Near-term supply pressure driving inflation outlook
  • WPI inflation expected to stabilize due to government steps
  • Signs food, fuel inflation spreading to other items
  • Current petroleum prices not viable in long run
  • Inflation largely due to supply-side bottlenecks
  • Supply crunch in some commodities on poor monsoon
  • Poor rain prevented seasonal food price fall post October
  • Hype about khariff failure exacerbated WPI expectation
  • Base effect, mild manufacturing WPI helped recovery
  • Divergence between WPI, CPI inflation rates declining
  • Food inflation may have peaked in December, seen easing
  • What, rice price rise on inflationary expectations
  • Low demand causing price moderation in mining FY10


  • Agriculture sector continues to be cause of concern
  • Need policy initiatives to raise farm growth to 4%
  • Likely to end FY10 with sufficient wheat stocks
  • Fear of pulses shortage may be causing price spurt
  • Higher sowing area of pulses may tame prices
  • Local sugar supply shortage causing price surge
  • Global sugar price rise likely on big imports by India
  • High inflation in milk from coarse cereals, oil cakes
  • FCI should be allowed to keep flexible buffer norms
  • Need to improve govt strategy for food releases
  • Govt shouldn’t have any dealing with fertiliser companies
  • Fertiliser companies should be allowed pricing freedom
  • Provide fertiliser subsidy to farmers
  • Introduce coupon system to subsidise fertilisers
  • Hype about kharif failure encouraged hoarding
  • Delay in release of imported sugar aided price rise
  • High food grain stock putting stress on fiscal health
  • Efficient stock management needs urgent attention
  • Govt food grain stocks adequate to meet PDS needs
  • FY10 farm GDP fall seen only 0.2% despite poor rains
  • Apr-Dec rice, wheat off take 35.8 mln tn, up 43% on ry
  • High MSP has potential to raise open market prices
  • Support price benefit to small farmers doubtful
  • Balancing needs to small farmers, consumers a challenge
  • Govt wheat buy cost seen 1,504.39 rupee/100 kg FY10
  • Govt rice buy cost seen 1,893.71 rupee/100 kg 2009-10
  • Wheat open market sale scheme helped stabilise price
  • Fall in sugar output put pressure on prices
  • 2009-10 sugar output seen 16 mn tones
  • 2009-10 edible oil import seen 10.1 mn tones
  • India 2009-10 edible oil supply seen 18.3 mn tones
  • India 2009-10 edible oil requirement seen 13.8 mln tn
  • Apr-Dec farm futures volume 38% of commodity trade
  • Kharif crop output loss may be partly made up in rabi
  • Grain yield increase not enough to meet rising demand
  • Research, better farm methods key to high crop yield
  • Need to focus on states with low crop productivity
  • Output, yield of pulses, oilseeds a growing concern
  • Scope of pulses import limited to tight global supply
  • Falling private investment in agriculture a concern
  • Cheap, timely credit must to up private investment in farming
  • Research on high yield seeds must to counter drought
  • Food security, stock management priority areas
  • Multi-cropping, raising yield key to higher output
  • 2009-10 kharif grain area 66.8 mln ha, gown 4.6 mln on yr
  • Fertiliser use at 128.6 kg/ha in 2008-09
  • Oct-Dec post monsoon rains 8% above normal
  • NAFED oilseed buy 64,802 tn till Jan 4 on govt account
  • 2009-10 coffee output seen 290,000 tn, up 10.6% on yr
  • Coconut palm insurance scheme to continue FY


  • Industry sector “revival” evident post economic slowdown
  • Indian industrial outlook “bright” in medium term
  • Downward trend in IIP growth stands reversed
  • Growth in capital goods segment below pre-2007 level
  • Growth in consumer durables aiding industrial revival
  • Textile exports continue to lag
  • Fertilizer output hit by raw material availability
  • Local steel industry revived from global slowdown
  • Local steel outlook for 2010 remains positive
  • Local steel demand back on “stable footing”
  • Local steel demand seen up on real estate, auto growth
  • FDI inflow in farm sector services grew highest in 2009-10
  • Services sector attracted highest FDI inflow FY 10
  • Govt mulling overseas urea, ammonia projects
  • Contribution of food products in manufacturing WPI seen down
  • Capacity addition in power, road sectors “lagging”
  • Infrastructure impediment hampering industry growth

    Fiscal Policies

  • Indian economy has shown ‘V’-shaped recovery
  • Broad-base revival gives room for gradual stimulus cut
  • Fundamentals justify optimism for India in long run
  • Consider Finance Ministry panel suggestion to shape FY11 fiscal goals
  • Job losses seem to have reversed in recent months
  • Expect domestic oil output to grow on new discoveries
  • Food market condition, improved capital flow encouraging
  • Manufacturing sector showing buoyancy in recent months
  • Too early to say if buoyancy in manufacturing a trend
  • Seen substantial pick-up in corporate earnings, margin
  • Pace, shape of global recovery remains uncertain
  • Global recovery losing steam on stimulus cut
  • Transmission of monetary policy remains sluggish
  • Higher government borrowing raised banks’ SLR investments
  • Saving, investment rate good for medium term growth
  • Savings rate expected to rise further
  • Government should promote transparency in commodity futures
  • Impact of current subsidy system questionable

  • RBI policy stance transmission to real sector critical
  • Fiscal rectitude important for Indian economy
  • Need to monitor credit flow to productive sectors
  • Need to ensure medium, long-term growth on even keel
  • RBI policy aims at expanding credit at viable rates
  • RBI stance aimed at steady growth via credit quality
  • States Market Borrowing Rs 106000 cr up to Jan 15
  • Money market mostly orderly in FY 10 on high liquidity
  • CBLO volumes over 80% of total money market volume FY 10
  • Liquidity condition remained comfortable in 2010
  • RBI’s Rs 57000 cr OMO buys FY 10 aided liquidity
  • Monetary easing main theme of liquidity management FY 10
  • RBI actively held apt liquidity via OMO, LAF, MSS FY 10


  • Growth in bank credit remained low in FY 10
  • Public sector banks better than private in credit growth
  • Growth in food credit low so far in FY 10
  • Need more transparency in micro-finance functioning
  • Computerisation of banking sector in completion stage
  • Rise in risk appetite increased capital inflows in 2009

    Financial Institutions

  • Need to extend NPS to central, state autonomous bodies
  • Pension reforms made significant progress in India
  • Challenge to expand distribution network of NPS
  • Pension reforms to facilitate long-term savings
  • Interdependence of corporate, MFs rising concern


  • Govt intervention in markets should be minimal
  • Govt shouldn’t impose outright commodity futures ban
  • Equity market showed signs of recovery after April
  • Regulatory steps taken to make markets sound, stable
  • Seen revival in secondary market following stimulus
  • Volumes in currency futures on BSE not significant
  • Trading volumes in interest rate futures low
  • Retail investor participation limited in corporate debt market
  • Retail investor participation limited in mutual funds


  • Unique identity system to come into0 effect in 2012
  • Labour law reforms can improve Labour demand
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