Key Points: India’s Economic Outlook For 2011-2012

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Aug. 5 – India’s Economic advisory council has released its outlook for the year 2011-12. Some vital points are given below:

  • Economy is expected to develop at 8.2 percent in 2011-12.
  • Agriculture grew at 6.6 percent in 2010-11. Likely to nurture at 3.0 percent in 2011-12.
  • Industry grew at 7.9 percent in 2010-11. Likely to nurture at 7.1 percent in 2011-12.
  • Services grew at 9.4 percent in 2009-10. Likely to nurture at 10.0 percent in 2011-12.
  • The expected growth rate of 8.2 percent, although inferior than the earlier year, must be treated as high and respectable, given the current world situation.
  • The global economic and financial situation is not likely to improve according to the outlook.
  • To keep the economy growing at 9 percent it is significant to boost fixed investment rates.
  • Investment rates are expected at 36.4 percent in 2010-11 and 36.7 percent in 2011-12.
  • Domestic savings rates as a ratio of GDP are likely at 33.8 percent in 2010-11 and 34.0 percent in 2011-12.
  • The 2011 monsoon is anticipated to be in the range of 90 percent to 96 percent of Long Period Average. As a result, farm sector output is expected to grow at 3 percent.
  • The revised series (2004/05) for Index of Industrial Production shows an output growth pattern that is fairly different from what the old series (1993/94) had indicated.
  • The output growth was grossly underestimated by the old series in 2007-08 and overestimated in 2008-09 and 2009-10.
  • The impact of the Global Financial Crisis on industrial output was much stronger than had been indicated by the old series.
  • In 2010-11 the output growth was higher at 8.2 percent against 7.8 percent indicated by the old series.
  • Current Account deficit is US$44.3 billion (2.6 percent of GDP) in 2010-11 and likely at US$54.0 billion (2.7 percent of GDP) in 2011-12.
  • Merchandise trade deficit is US$130.5 billion or 7.59 percent of GDP in 2010-11 and projected at US$154.0 billion or 7.7 percent of GDP in 2011-12.
  • Invisibles trade surplus is US$86.2 billion or 5.0 percent of the GDP in 2010-11 and projected at US$100.0 billion or 5.0 percent in 2011-12.
  • Capital flows registered at US$61.9 billion in 2010-11 and are projected at $72.0 billion in 2011-12.
  • FDI inflows projected at US$35 billion in 2011-12 against the level of US$23.4 billion in 2010-11.
  • FII inflows projected to be US$14 billion which is less than half that of the last year’s US$30.3 billion.
  • Accumulation to reserves was US$15.2 billion in 2010-11 and is projected at US$18.0 billion in 2011-12.
  • The headline inflation rate would continue to be at 9 percent in the month of July-October 2011. There will be some relief starting from November and will decline to 6.5 percent in March 2012.
  • Available food stocks are to be freely released.
  • Significant role for fiscal policy to contain demand pressure. Need to ensure that fiscal deficit does not surpass the budgeted level.
  • RBI will have to persist to follow a tight monetary policy till inflation shows definite signs of decline.
  • Achieving fiscal targets set in 2011/12 budget estimates to present a significant challenge.
  • Government to redouble efforts to collect larger revenue, resolve cases to reduce tax arrears.
  • Minimize avoidable expenditures and initiate measures to increase revenues.
  • Resolve issues with states and introduce Goods and Services Tax.
  • Reforms in power sector distribution system to limit the liabilities of state governments.

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