Economic Outlook 2010-11Highlights
Dr. C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister released the document ‘Economic Outlook 2010-11’ at a Press Conference in New Delhi today. Following are the highlights of the document:
· Economy to grow at 8.5 per cent in 2010-11 and 9.0 % in 2011-12
o Agriculture grew at 0.2% in 2009-10. Projected to grow at 4.5% in 2010-11 and 4.0% in 2011-12.
o Industry grew at 9.3% in 2009-10. Projected to grow at 9.7% in 2010-11 and 10.3 % in 2011-12.
o Services grew at 8.5% in 2009-10. Projected to grow at 8.9% in 2010-11 and 9.8% in 2011-12.
· Slow recovery in global economic and financial situation
· Rising domestic Savings and Investment chief engines of growth
o Investment rate is expected to be 37% in 2010-11 and 38.4% in 2011-12.
o Domestic savings rate is expected to be over 34% in 2010-11 and close to 36% in 2011-12.
· Current Account deficit estimated at 2.7% of GDP in 2010-11 and 2.9% of GDP in 2011-12
o Merchandise trade deficit projected to be $ 137.8 billion or 9% of the GDP in 2010-11 and $160 billion or 9.3% of GDP in 2011-12.
o Invisibles trade surplus projected to be $ 96 billion or 6.3% of the GDP in 2010-11 and $109.7 billion or 6.4% in 2011-12.
· Capital Flows can be readily absorbed by financing needs of the high growth of the Indian Economy.
o Against the level of $53.6 billion in 2009-10, the capital inflows projected to be $ 73 billion for 2010-11 and $91 billion for 2011-12.
o Accretion to reserves was $13.4 billion in 2009-10. Projected to be $30.9 billion in 2010-11 and $39.8 billion in 2011-12.
· Inflation rate projected at 6.5 % by March 2011 due to expected normal monsoon combined with the base effect.
o The provisional headline inflation was above 10% in June 2010.
o Controlling high inflation rate essential for sustainable growth in medium term.
o Available food stocks must be released to have a dampening effect on prices.
· Monetary Policy to complete the process of exit and operate with bias toward tightening.
o Credit off take picked up. Strong growth rate in the 1st quarter of 2010-11.
o Fund flow from capital market to commercial sector quite strong. Bond issuance growth relatively higher than issuance of equity.
o Liquidity conditions are taut enough for monetary policy signals to be appropriately transmitted to the financial sector. A bias toward tightening is necessary.
o Exchange rate variations will remain within acceptable range.
· Exit from the expansionary fiscal policy not only feasible but also necessary
o High buoyancy in direct and indirect tax collections. Telecom auctions and decontrol of the petroleum products prices to provide additional cushion.
o Fiscal deficit outturn may be lower than the budgeted consolidated fiscal deficit of 8.4% of GDP for 2010-11.
o Revenue Deficit as a ratio of GDP expected to decline from 6.3% in 2009-10 to 4.6% in 2010-11.
o Operationalization of Goods and Services Tax (GST) should be a priority.
o Budgeted level of Fiscal Deficit and Revenue Deficit still beyond comfort zone.
o Need to rationalize the food and fertilizer subsidies.
· To sustain a growth rate of 9.0 per cent, focus is required on:
o Containing inflation
o Improving farm productivity
o Closing the large physical infrastructure deficit, especially in the power sector.
GDP Growth – Actual & Projected
Unit: per cent
|
|
|
2005/06 |
2006/07 |
2007/08 |
2008/09 |
2009/10 |
2010/11 |
2011/12 |
|
|
|
|
|
|
QE |
Rev |
f |
f |
|
Year-on-year Growth Rates |
||||||||
|
1 |
Agriculture & allied activities |
5.2 |
3.7 |
4.7 |
1.6 |
0.2 |
4.5 |
4.0 |
|
2 |
Mining & Quarrying |
1.3 |
8.7 |
3.9 |
1.6 |
10.6 |
8.0 |
8.0 |
|
3 |
Manufacturing |
9.6 |
14.9 |
10.3 |
3.2 |
10.8 |
10.0 |
10.5 |
|
4 |
Electricity, Gas & Water Supply |
6.6 |
10.0 |
8.5 |
3.9 |
6.5 |
7.5 |
9.0 |
|
5 |
Construction |
12.4 |
10.6 |
10.0 |
5.9 |
6.5 |
10.0 |
11.0 |
|
6 |
Trade, Hotels, Transport, Storage & Communication |
12.1 |
11.7 |
10.7 |
7.6 |
9.3 |
10.0 |
10.0 |
|
7 |
Finance, insurance, real estate & business services |
12.8 |
14.5 |
13.2 |
10.1 |
9.7 |
9.5 |
10.5 |
|
8 |
Community & personal services |
7.6 |
2.6 |
6.7 |
13.9 |
5.6 |
6.0 |
7.5 |
|
9 |
Gross Domestic Product at factor cost |
9.5 |
9.7 |
9.2 |
6.7 |
7.4 |
8.5 |
9.0 |
|
10 |
Industry (2 + 3 + 4 + 5) |
9.3 |
12.7 |
9.5 |
3.9 |
9.3 |
9.7 |
10.3 |
|
11 |
Services (6 + 7 + 8) |
11.1 |
10.2 |
10.5 |
9.8 |
8.5 |
8.9 |
9.6 |
|
12 |
Non-agriculture (9 - 1) |
10.5 |
11.0 |
10.2 |
7.7 |
8.8 |
9.2 |
9.8 |
|
14 |
GDP (factor cost) per capita |
7.8 |
8.1 |
7.7 |
5.2 |
6.2 |
7.0 |
7.5 |
|
Some Magnitudes |
||||||||
|
15 |
GDP at factor cost - 2004/05 prices in Rslakh crore (or Trillion) |
32.5 |
35.6 |
38.9 |
41.5 |
44.6 |
48.4 |
52.8 |
|
16 |
GDP market & current prices in Rslakh crore (or Trillion) |
37.1 |
42.8 |
49.5 |
55.7 |
62.3 |
70.3 |
79.2 |
|
17 |
GDP market & current prices in US$ Billion |
837 |
947 |
1,231 |
1,222 |
1,317 |
1,529 |
1,722 |
|
18 |
Population in Million |
1,106 |
1,122 |
1,138 |
1,154 |
1,170 |
1,186 |
1,203 |
|
19 |
GDP market prices per capita current prices |
33,512 |
38,182 |
43,479 |
48,305 |
53,258 |
59,305 |
65,867 |
|
20 |
GDP market prices per capita in current US$ |
757 |
844 |
1,082 |
1,059 |
1,126 |
1,289 |
1,432 |
Note: QE refers to the Quick Estimates for National Income released on 29 Jan 2010. Rev refers to the Revised Estimate for National Income released on 31 May 2010.
f stands for forecasts made by the Council.
Balance of Payments
Unit: US$ billion
|
|
2004/05 |
2005/06 |
2006/07 |
2007/08 |
2008/09 |
2009 / 10 |
2010/11 |
2011/12 |
|
Merch. Exports |
85.2 |
105.2 |
128.9 |
166.2 |
189.0 |
182.2 |
216.1 |
254.0 |
|
Merch. Imports |
118.9 |
157.1 |
190.7 |
257.6 |
307.7 |
299.5 |
353.9 |
414.3 |
|
Merchandise Trade Balance |
–33.7 |
–51.9 |
–61.8 |
–91.5 |
–118.7 |
–117.3 |
–137.8 |
–160.3 |
|
–4.7% |
–6.2% |
–6.5% |
–7.4% |
–9.7% |
–8.9% |
–9.0% |
–9.3% |
|
|
Net Invisible Earnings |
31.2 |
42.0 |
52.2 |
75.7 |
89.9 |
78.9 |
96.0 |
109.7 |
|
4.3% |
5.0% |
5.5% |
6.2% |
7.4% |
6.0% |
6.3% |
6.4% |
|
|
o/w ITES |
14.7 |
23.8 |
27.7 |
37.2 |
44.5 |
41.3 |
46.2 |
53.1 |
|
Private Remittances |
20.5 |
24.5 |
29.8 |
41.7 |
44.6 |
52.1 |
58.3 |
67.0 |
|
Investment Income |
–4.1 |
–4.1 |
–6.8 |
–4.4 |
–4.0 |
–6.4 |
–6.5 |
–6.5 |
|
Current Account Balance |
–2.5 |
–9.9 |
–9.6 |
–15.74 |
–28.7 |
–38.4 |
–41.8 |
–50.7 |
|
–0.3% |
–1.2% |
–1.0% |
–1.3% |
–2.4% |
–2.9% |
–2.7% |
–2.9% |
|
|
Foreign Investment |
13.0 |
15.5 |
14.8 |
45.0 |
3.5 |
52.1 |
55.0 |
65.0 |
|
o/w FDI (net) |
3.7 |
3.0 |
7.7 |
15.4 |
17.5 |
19.7 |
30.0 |
30.0 |
|
Inbound FDI |
6.0 |
8.9 |
22.7 |
34.2 |
35.0 |
31.7 |
50.0 |
55.0 |
|
Outbound FDI |
2.3 |
5.9 |
15.0 |
18.8 |
17.5 |
12.0 |
20.0 |
25.0 |
|
Portfolio capital |
9.3 |
12.5 |
7.1 |
29.6 |
–14.0 |
32.4 |
25.0 |
35.0 |
|
Loans |
10.9 |
7.9 |
24.5 |
41.9 |
4.1 |
11.9 |
16.8 |
24.5 |
|
Banking capital |
3.9 |
1.4 |
1.9 |
11.8 |
–3.2 |
2.1 |
0 |
0 |
|
Other capital |
0.7 |
1.2 |
4.2 |
9.5 |
4.5 |
–12.7 |
0 |
0 |
|
Capital Account Balance |
28.0 |
25.5 |
45.2 |
108.0 |
8.7 |
53.6 |
72.8 |
90.5 |
|
3.9% |
3.0% |
4.8% |
8.8% |
0.7% |
4.1% |
4.8% |
5.3% |
|
|
Errors & Omissions |
0.6 |
–0.5 |
1.0 |
1.2 |
1.1 |
–1.7 |
|
|
|
Accretion to Reserves |
26.2 |
15.1 |
36.6 |
92.2 |
–18.9 |
13.4 |
30.9 |
39.8 |
|
3.6% |
1.8% |
3.9% |
7.5% |
–1.5% |
1.0% |
2.0% |
2.3% |
Note: Percentage figures proportion to GDP
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