The Economic Survey presented to the European Parliament today says that the economy has thrown back from the global economic downturn, and is on its way to the growth of 9 percent. CSO estimates of 7.2 percent GDP growth for 2009-10 reflects the fast-paced reconstruction after the index of industrial statistics (IIP), posting a record 16.8 percent year-on-year growth during the month December 2009th The statement says that the economy has responded well to the policy measures adopted in the aftermath of the financial crisis. It says the adverse effect due to delays and sub-normal monsoon is largely contained and better than the average Rabi season is expected. The statement says that the rise is justified by the pickup in goods exports, capital flows and non-food bank credit.
The turnaround came in the second quarter of 2009-10 when the economy grew by 7.9 percent year-on-year basis. The CSO estimates that 7.2 percent GDP growth in industrial production increases by 8.2 percent and services sector at 8.7 percent. The rise is very impressive, despite a decline of 0.2 percent in agricultural production caused mainly by sub-normal monsoon climate. The statement says that the broad nature of the production gives a gradual pull-back in time, some of the measures implemented during the last 15 to 18 months to bring the economy back on growth of 9 percent.
The statement expresses concern about the emergence of high double-digit food inflation, especially in the second half. Food inflation stood at 17.9 percent for the week ending January 30, 2010, while inflation in fuel, power, light and lubricants for 10.4 percent. It says that the major part of this rise can be explained by supply side bottlenecks in some essential commodities. Since December 2009 there have been signs of these high food prices, along with harder non-administered fuel prices get passed on to other non-food products. This has created some concern for the higher than expected general inflation over the next few months.
The rise in GDP growth set out in CSO advance estimates is broad based with 7 of 8 sectors / subsectors showing a growth of 6.5 percent or higher. Per capita growth in income has recovered to 5.3 percent in 2009-10 from 3.7 percent the year before. Per capita consumption growth is reflected in the final private consumption shows a downward trend since 2007-08.
The statement said that the country has 23 percent less rainfall in the southwest monsoon in 2009, but some of the deficit was made up during the post monsoon season, when the country has received 8 per cent excess rainfall. Kharif 2009-10 season showed a decline of nearly 6.5 percent of the area in the fall is limited to the rice crop. While the decline in area under Kharif pulses was 5.63 percent, is a part of this decline is composed of the Rabi season. Per available estimates, wheat, pulses and groundnut have experienced an increase in acreage compared with last year.
The growth in money supply (M3) declined from around 21 percent at the beginning of the year to 16.5 percent in mid-January 2010, and has been below the indicated growth projection. While in the first half, credit to the state remained the main driver of growth in money supply has slowed since the third quarter of 2009-10. The statement says that since the outbreak of the global financial crisis in 2008, the RBI followed an expansionary monetary policy to support the rapid restoration of prosperity and growth. This has also contributed to the unique needs of government borrowing to finance its fiscal deficit is. Almost two-thirds of the loans by the government was completed in the first half, which not only helped to control the pressure on interest rates, but also made room for a revival of private investment demand in the second half of the year. The guideline expansion of the state as part of the political response to counter the effects of the global downturn has led to growing budget deficit from 2.6 percent in 2007-08 to 6.5 percent in the budget estimates for 2009-10.
The statement said that the recommendations in thirteen Finance Commission had taken on board in the formulation of fiscal policy in 2010-11 and medium term. Finance Commission has recommended a calibrated exit strategy from the expansionary fiscal policy in 2008-09 and 2009-10. It has also proposed that the revenue deficit of the center must be gradually reduced and removed, followed by the emergence of revenue surplus in 2014-15.
The statement notes with satisfaction that several factors resulting from the performance of the economy over the past 12 months bodes well for the Indian economy. Gross domestic savings as a share of GDP is at 32.5 percent in 2008-09, while gross domestic gross investment was 34.9 percent. These figures compare favorably with some of the fastest growing economies. It also underlines the importance of the presence of Indian companies in the global market. Statement hopes that the economy will return to 9 percent growth over the medium term. This follows the revival in investment and private consumption demand impressive growth in exports in November and December and the remarkable turn in the Core infrastructure sector. It stands for a set back agriculture is gradually coming back to the planned development, and a reasonable one percent additional GDP growth, combined with the recovery of world economy, the Indian GDP expected to grow 8.5 percent + / -0, 25 percent. With full recovery of the economy can break the 9 per cent mark in 2011-12. Given the improving fundamental in the economy, says Survey, if there are improvements in infrastructure, both in urban and rural, and reforms in governance and management, it is possible for Norway to move into double-digit growth and become the fastest growing economy in the world within the next four years.
Source:
http://beta.thehindu.com/business/Economy/article113170.ece
