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