Indian economy is poised to grow by 9 per cent in 2011-12 despite risks of global events like volatility in commodity prices, exacerbated by political turmoil in the Middle East, according to Economic Survey.
The Survey for 2010-11, tabled in Parliament by Finance Minister Pranab Mukherjee, has pegged the economic growth at 8.6 per cent for the current fiscal, helped by broad based rebound in agriculture and “continued momentum” in manufacturing and private services.
Inflation, an area of concern which acts as a road block for the growth, is expected to be 1.5 per cent higher than projected earlier, it said. Food inflation, in particular, has come as major challenge for the economy.
Prime Minister Manmohan Singh had on Thursday said that general inflation would come down to 7 per cent by March end from more than 8 per cent now.
Days ahead of the general budget, the Survey indicated the need for fiscal consolidation. “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,” it said.
Recognising the fact that prices continue to be high, the Survey has underlined the need to “monitor emerging trends in inflation” on a monthly basis while suggesting that the government should improve delivery mechanism by strengthening the situation and addressing “corruption.”
The 456-page report said inflation is expected to be higher than “what would be if the country was not on the growth curve.”
About the growth projections, the document said that with good monsoons, the agriculture sector is expected to grow by 5.4 per cent during the current financial year up from a lowly 0.4 per cent in the fiscal 2009-10.
“Rise in food inflation and the critical role of agriculture underlines the need for larger investments in the agriculture sector enroute to the second green revolution,” it said.
In its endeavour to achieve higher economic growth, the government should pursue a reform agenda which include over a dozen steps including streamlining land acquisition and faster environmental clearance for infrastructure projects.
The Survey called for an early introduction of the Goods and Service Tax (GST).
It underlined the need for private sector participation in social sectors such as health and education in the form of ’public-social-private’ partnership for supplementing the government efforts.
In the backdrop of difficulties in land acquisition, the Survey, which is considered as report card of the government along a paper prescribing policies to be pursued, suggested formation of a National Forest Land Bank.
This land bank will have clear titles to reduce approval time for forest go ahead.
It said that focus of the government’s flagship programme ’Mahatma Gandhi National Rural Employment Guarantee Scheme’ should be shifted to permanent asset building and infrastructure development.
The Economic Survey pegged the country’s agriculture sector growth at 5.4 per cent this fiscal, as against 0.4 per cent in the previous year.
The Survey also called for a “Second Green Revolution with technological breakthrough in the agriculture sector” to boost farm output and ensure the food security of the country.
“Agriculture likely to grow at 5.4 per cent in 2010-11,” said the Survey, which was tabled in Parliament on Friday.
The growth of agriculture and allied sectors is expected to be higher this year on the back of a revival in foodgrains production in the 2010-11 crop year (July-June) following a good monsoon.
Foodgrains production is estimated to rise to 232.07 million tonnes in 2010-11 crop year from 218.11 million tonnes last year. The country is all set to harvest a record wheat, pulses and cotton crop this year.
In the 2009-10 crop year, farm sector growth was only 0.4 per cent due to severe drought in 2009, which hit almost half the country, reducing foodgrain production by 16 million tonnes.
Following are the highlights of Economic Survey for the fiscal year 2010-11, presented in Parliament on 2011 February 25:
* Economy to grow at 8.6 per cent in 2010-11 and 9 per cent in the next fiscal.
* Gross Fiscal Deficit stands at 4.8 per cent of GDP, down from 6.3 per cent last year.
* Inflation expected to be 1.5 per cent higher than what it would be if the economy were not on growth path.
* Economy sees broad-based growth; rebound in farm and continued momentum in manufacturing, private services.
* Fundamentals strong with growing savings and investments, rapid rise in exports.
* Industrial output grows by 8.6 per cent; manufacturing sector registers 9.1 per cent.
* Exports in April-December 2010 up 29.5 per cent; imports up 19 per cent.
* Trade gap narrowed to $ 82.01 billion in April-December 2010.
* Food inflation, higher commodity prices and volatility in global commodity markets cause of concern.
* Inflation continues to be high; need to monitor emerging trends in inflation on a sequential monthly basis.
* To check food inflation, the government should improve delivery mechanisms by strengthening institutions and addressing corruption.
* Savings rate has gone up to 33.7 per cent, while the investment rate is up at 36.5 per cent of GDP.
* Rising food inflation underlines need for larger investment in farming, enroute to Second Green Revolution.
* Net bank credit grows by 59 per cent.
* Social programme spending stepped up by 5 percentage points of GDP over past 5 years.
* Production of foodgrains estimated at 232.1 mn tonnes.
* Forex Reserves estimated at $ 297.3 billion.
* Accelerated investments needed in infrastructure to address delays, cost overruns, regulatory impediments.
* Telecom sector did exceedingly well; role of services sector as the potential growth engine laudable.
* Policies needed to promote new areas such as accounting, legal, tourism, education, financial and other services.
* Economic growth to be faster than ever before in next two decades.
* Need for efficient taxation of goods and services by a new GST regime.
* Improve convergence of social and financial inclusion schemes to check unemployment, poverty and leakages.
* Reform university and higher education; correct demand supply mismatch in job market.
* Meet resource gap in higher education through public private partnership, with regulatory oversight.
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