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Sunday, March 18, 2012

Economic Survey of 2011-2012


Economic Survey Highlights for the year 2011-12:

On Growth

*Indian economy to grow 8.75-9.25% in FY12
*Expect Indian econ to top 9% growth rate FY12
*Maintaining growth with price stability key challenge
*Seeing fast, strong turnaround in Indian economy
*India growth likely to revert to pre-crisis level FY12
*Expect India''s economic growth to pick up medium-term
*Probability of second-dip recession very low
*FY11 GDP growth relatively broad-based
*Monsoon, crude prices pose risk to econ growth

On Inflation

*Inflation is clearly a dominant concern
*Inflation may stay elevated on West Asia crisis
*Food price, demand pressure to drive inflation outlook
*Inflation largely driven by food items
*High food inflation "dark cloud" on Indian economy
*High food prices driven by demand factors
*Inflation pressure seen exacerbated by global prices
*Rising purchasing power aiding spurt in food prices
*Economic recovery triggered demand-side pressure in economy
*Inflation pressures from both domestic, global factors
*Core inflation suggests inflation now generalised
*Need to prevent inflation slipping into core sector
*Food inflation stubbornly in double-digits
*Inflation likely to moderate on fiscal, monetary steps
*Committed to provide cooking fuel at affordable price
*Plan to increase diesel prices in staggered manner
*Government to cap auto fuel prices if crude oil spurts
*April-December average inflation of 9.4% highest in 10 years
*High food inflation not unique to India
*Inflation significantly above RBI''s comfort level
*Need to be vigilant against demand-side pressures
*Grain release in batches, not bulk, to tame inflation

On Fiscal Front

*Centre''s fiscal broadly on consolidation track April-December
*India FY11 fiscal gap seen 4.8% on higher GDP base
*India FY11 revenue gap seen 3.8% of GDP
*Current account gap likely to moderate on export spurt
*Need to lower fiscal deficit
*Liquidity crunch mainly due to large government cash balance
*Need more proactive fiscal steps to eradicate poverty
*Favours smart cards also for kerosene, fertiliser subsidy
*Buoyant tax revenue key driver of fiscal consolidation
*Rise in corporate, service tax mop-up noteworthy
*Prospects of revenue-led fiscal consolidation bright
*Better subsidy targeting improving fiscal management
*Direct Taxes Code proposed to be launched April 2012
*Tax buoyancy, 3G auction brightened FY11 fiscal health
*States likely to be back on fiscal consolidation FY12
*States'' consensus on GST yet to be achieved
*Deepening reforms key to sustain fiscal consolidation

On Monetary Front

*Need persistent anti-inflation monetary stance
*Government implementing gradual exit from stimulus
*Liquidity management major challenge for RBI
*Excessive cash crunch makes credit delivery difficult
*Need G20 co-operation to manage forex flow volatility
*RBI forex market intervention unlikely to be inflationary
*Don''t want total reliance on import to beat shortages

On Banking, Financial Institutions

*Minimum capital requirement for banks should be graded
*Two types of banking licences could be considered
*May mull separate licence for basic, full banking services

On Industry

*Deceleration in industrial output cause for concern
*Slowdown in industrial growth seen temporary
*Medium-term industrial growth prospect seen positive
*Plan to increase diesel prices in staggered manner
*Government to cap auto fuel prices if crude oil spurts
*Committed to provide cooking fuel at affordable price
*Need to keep all options open if forex flows hurt economy

On Food Prices

*Food price, demand pressure to drive inflation outlook
*Maintaining growth with price stability key challenge
*High food prices driven by demand factors
*Higher FY11 farm growth to help ease food prices
*Rising purchasing power aiding spurt in food prices
On Agriculture

*Need to review grain release, procurement policies
*Don''t want total reliance on import to beat shortages
*Ample scope for improvement in grain release policy
*Grain release in batches, not bulk, to tame inflation
*Urgent need to expand storage space, facilities
*Need to plug PDS slippages to expand, improve coverage
*Smart card, coupons to help target food subsidy better
*Favours smart cards also for kerosene, fertiliser subsidy

On Capital, Investment

*Need to deepen capital markets
*"Sluggish" bureaucracy impeding FDI inflows

On External Affairs

*Economic uncertainty prevails in Europe, US
*Probability of second-dip recession very low
*Need to keep all options open if forex flows hurt econ
*Slowdown in FDI partly offset spurt in FII investment
*Need G20 co-operation to manage FX flow volatility
*RBI forex market intervention unlikely to be inflationary
*"Sluggish" bureaucracy impeding FDI inflows

Miscellaneous

*Direct Taxes Code proposed to be launched April 2012
*Tax buoyancy, 3G auction brightened FY11 fiscal health
*States likely to be back on fiscal consolidation FY12
*States'' consensus on GST yet to be achieved




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