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Economic growth robust, inflation a worry

News18test sharma |

Updated: February 25, 2011, 6:15 PM IST
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Economic growth robust, inflation a worry
Economic Survey says growth has been broad-based with a rebound in the agriculture sector.

New Delhi: The Indian economy is expected to grow at 8.75-9.25 per cent in financial year 2012 according to the Economic Survey for the year 2011-12 announced on Friday.

Robust growth and steady fiscal consolidation have been the hallmark of the Indian economy in the year 2010-11 so far. The growth rate has been 8.6 per cent in 2010-11 and is expected to be around 9 per cent in the next fiscal year.

The growth has been broad-based with a rebound in the agriculture sector which is expected to grow around 5.4 per cent. Manufacturing and services sector have registered impressive gains. Savings and investment are looking up while exports are rising. However, food inflation, higher commodity prices and volatility in global commodity markets have been a cause of concern underscoring the need of fiscal consolidation and stronger reserves.

Below are the highlights:

On Growth:

Indian economy to grow 8.75-9.25 per cent in FY12
Expect Indian economy to top 9 per cent 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 per cent 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 per cent on higher GDP base
India FY11 revenue gap seen 3.8 per cent 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

Speaking about it, Siddhartha Sanyal, Chief India Economist, Barclays Capital told CNBC-TV18 said the survey was on expected lines. He expects fiscal deficit at 5.3 per cent of GDP in FY12. "Nominal GDP is expected to come in at 14.5-15 per cent for next fiscal," he said.

First Published: February 25, 2011, 6:15 PM IST
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