Robust growth and steady fiscal consolidation have been
the hallmark of the Indian economy in the year 2010-11 so far. The growth rate
has been 8.6 percent in 2010-11 and is expected to be around 9 percent in the
next fiscal year. The growth has been broad based with a rebound in the
Agriculture sector which is expected to grow around 5.4 per cent. Manufacturing
and Services sector have registered impressive gains. Savings and investment are
looking up while exports are rising. However 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. These are
some of the high points of the Economic Survey 2010-11, presented by the Finance
Minister Shri Pranab Mukherjee in Lok Sabha today.
Recognizing the fact that inflation continues to be high even though it has come
down markedly from where it was at the start of the fiscal year, the Survey
underlined the need to monitor emerging trends in inflation on a sequential
monthly basis. In order to check food inflation, it has suggested, the
Government should improve the delivery mechanisms by strengthening the
institutions and addressing corruption. The survey has pointed out that the
inflation is expected to be 1.5 percent higher than what would be if the country
was not on the growth curve.
The Survey has observed that a rise in savings and investments and pick up in
private consumption has resulted in 9.7 per cent growth of GDP at market prices
(constant) in 2010-11.Savings rate has gone up to 33.7 percent while the
investment rate is up to 36.5 percent of GDP in 2009-10.
The Survey points out that the agriculture sector growth in the first four years
of the 11th Plan (2007-12) is estimated at 2.87 per cent. The foodgrain
production went up to 232.1 billion tonnes from 218.1 billion tonnes in 2009-10.
With a relatively good monsoon the agriculture-sector is expected to grow at 5.4
per cent during 2010-11. The rising food inflation and the critical role of
agriculture underline the need for a larger investment in agriculture enroute to
the second green revolution.
The Survey reports that the industrial output growth rate was 8.6 per cent while
the manufacturing sector registered a growth rate of 9.1 per cent in 2010-11.
During April-November 2010 telecom, crude oil production, civil aviation sectors
performed well while the power generation, cement and fertilizer production,
railway freight traffic and cargo handling at major ports have grown at
comparatively lower rates. Six core industries registered a growth of 5.3 per
cent (provisional) in April-December, 2010 as against 4.7 per cent during the
same period in 2009-10.
Economic Survey 2010-11 has highlighted the increasing role of infrastructure
services which have been deepening rapidly with rising investments. However
unmet gaps still remains large and accelerated investments will be needed in the
next Plan period for addressing delays, cost overruns and regulatory and pricing
impediments. The telecommunications sector has done exceedingly well as the tele
density has increased from 20.74 per cent in 2004 to 143.95 per cent in 2010 in
urban areas. While in the rural areas it has gone up from 1.57 per cent in 2004
to 30.18 per cent in 2010.
Lauding the role of services sector as the potential growth engine, the Survey
has called for the policies to promote further opportunities in new areas in
global demand such as accounting, legal, tourism, education, financial and other
services beyond the IT and business process sectors.
The Survey points out that the exports in April-December 2010 went up by 29.5
per cent while the imports during the same period registered a growth rate of 19
per cent. The trade gap narrowed down to US $ 82.01 bn in the same period.
Balance of payment situation has improved due to surge in capital flows and rise
in foreign exchange reserves which have been accompanied by rupee appreciation.
During current fiscal foreign exchange reserves increased by US $ 18.2bn from US
$ 279.4 bn in end April 2010 to US $ 297.3 bn in end December 2010.
The inclusive growth agenda of the Government is reflected in the 59 per cent
rise in Net Bank Credit . The expenditure on Social sector programs has been
stepped up by 5 percent point of GDP over the past five years.
The Survey points out that Gross Fiscal Deficit is 4.8% of GDP in 2010-11 as
against 6.3 percent of GDP in the previous year. The Revenue deficit in the
current financial year has been 3.5 percent of GDP as against 5.1 percent in the
previous year.
The Economic Survey 2010-11 has expressed satisfaction at the progress of fiscal
consolidation and the role of monetary policy on tackling inflation, ensuring
availability of funds and expansion of credit growth. It has called for
efficient taxation of goods and services by a new GST, raising revenues,
installing stronger safeguards and measures to accelerate financial inclusion.
The Economic Survey 2010-11 has lauded the Government’s efforts in addressing
social and financial inclusion. The specific schemes for Scheduled Castes,
Tribes, OBCs and the regions such as North-East, expansion of Mahatma Gandhi
NREGA, Sarva Shiksha Abhiyan , National Rural Health Mission, in terms of
coverage as well as the spending and monitoring have found specific mention in
the report. The survey has advised that a better convergence of the schemes to
address the issues of unemployment and poverty alleviation could avoid
duplication and leakages.
A call for reforms in the university and higher education and correcting the
demand supply mismatch in the job market has been made in the report. It says
the gap in resources for higher education may be met on the basis of public
private partnership without diluting the regulatory oversight of the Government.
The Survey has also made specific mention of Government’s active engagement on
issues related to climate change with expanded financing of programs and better
policies.
The Economic Survey has suggested that in the long run the potential engines of
growth for the country could be from skill development and innovative activity
and therefore, efforts should be made to promote them.
Regarding the outlook for the Indian economy, the Survey says that despite the
risks of global events, such as volatility in commodity prices like crude oil
exacerbated by political turmoil in the Middle-East, the Indian economy seems
poised to scale greater heights in terms of macro economic indicators. It sums
up by stating that the real GDP growth is expected to reach the 9 per cent mark
in 2011-12 and the next two decades may well see the economy growing faster than
it has done any time in the past.
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