Oil price rise to impact India's GDP growth: Goldman Sachs
NEW DELHI: A rise in global oil prices by $ 10 per barrel would reduce India's economic growth by 0.2 percentage points and also affect the country's current account deficit, Goldman Sach said.
"A VAR (value-at-risk) analysis suggests that a $ 10 increase in oil would reduce GDP growth by 0.2 percentage point," Goldman Sachs said in its latest edition of 'Asia Economics Analyst'.
India imports three quarters of its annual oil and gas requirements, with the Middle East and North Africa regions contributing to a substantial chunk of it. India's import bills amount to $ 18 billion.
Global oil prices have almost doubled in the past one year. The ongoing political unrest in Libya, a major oil exporter and OPEC member, has disrupted supplies and pushed up crude prices further.
Brent crude, one of the benchmark index, was trading at nearly $ 124 on April 23. Global oil prices are at the highest level in two-and-a-half years.
Earlier this week, the International Energy Agency called on oil producing nations to reassure the market by utilising spare capacity.
"With higher oil prices the sensitivities increase due to negative feedback loops from weakening stock prices and tightening stock prices and tightening financial conditions," the report said.
The Indian economy is projected to grow at above 8.5 per cent in 2011-12, with the government aiming to increase growth to 9 per cent this financial year.
Regarding deficits, Goldman Sachs said: "According to our estimates, with every $ 10 increase in oil prices, the current account deficit (CAD) would rise by 0.4 percentage points."
The CAD has been projected at 3.5 per cent of the GDP for the fiscal 2010-11. In his Budget speech, Finance Minister Pranab Mukherjee had said the target would be to bring it down further this fiscal.
Food inflation likely to be around 8.5%: SMC Global
NEW DELHI: Food inflation is expected to hover around 8.5 per cent in the remaining months of 2011, if the monsoon remains normal as predicted by the meteorological department, according to a report.
Normal monsoon would enhance farm production and enhance purchasing power of farmers which could push sales of FMCG and automobiles by 25 to 30 per cent, SMC Global Securities said.
"Good monsoon will definitely bring stability in food inflation at about 8.5 per cent for the rest of the year and create aspirations for higher agricultural growth of over 4 per cent," SMC Global Securities Ltd Chairman & Managing Director Subhash Aggarwal said.
It wants Union and states governments to introduce reforms in agriculture sector through measures such as scrapping of Agriculture Produce Marketing committees which, it says, gives virtual monopoly to buy crops to certain traders.
Food inflation came back to single digits at 9.5 per cent for the week ended March 19 helped by cheaper pulses though vegetables and fruits remained expensive.
India Meteorological Department (IMD) has forecast normal monsoon season this year with the country likely to receive 98 per cent rains of the Long Period Average (LPA).
The LPA is the average rainfall over the past 50 years, which is 89 cm.
Higher revenues needed to fund 9-9.5% GDP growth in 12th Plan
NEW DELHI: Going by a Plan panel prescripttion, India would have to scale up tax collections to find resources for achieving 9-9.5 per cent economic growth without hurting fiscal deficit.
The Commission has suggested the government to raise net tax- GDP ratio from 7.4 per cent in 2011-12 to 9.1 per cent by 2016-17, the terminal year of the 12th Five Year Plan.
Tax- gross domestic product (GDP) ratio reflects the portion of taxes that the government collects as percentage of the GDP in a year. High ratio target means that government will have to raise tax rates and widen base to garner more revenue.
The 12th Plan (2012-17) proposes to raise the annual economic growth rate target to 9-9.5 per cent from 8.2 per cent in the current Plan and reduce the average fiscal deficit to 3.3 per cent from 4.9 per cent of the GDP during the same period.
During the full Planning Commission meeting last week headed by Prime Minister Manmohan Singh , the panel indicated that present level of resources would not be sufficient to expand the net of the social sector schemes in the country.
It suggested that the expected revenue realization of 7.7 per cent per annum in 11th Plan (2007-12) would have to scaled up to 8.4 per cent of the gross domestic product (GDP) in the 12th Plan.
The panel has pitched for increasing the gross budgetary support (GBS) to 4.1 per cent of GDP per annum in 12th Plan from 3.5 per cent in the current five-year period.
The Commission wants the GBS be pegged at as high as 4.8 per cent of the GDP in 2016-17. The Budget estimates for the current fiscal indicate that GBS would be 3.7 per cent.
GBS indicates the resources allocated for centrally sponsored social sector schemes.
It is also suggested by the panel that the non-Plan (recurring) expenditure should be reduced in 12 Plan to 8 per cent of GDP from the 10.3 per cent level estimated in the 11th Plan