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Economic Survey 2010-11

Economic Survey 2010-11

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Published by ndtvonline
Highlights of the 2010-11 Economic Survey
Highlights of the 2010-11 Economic Survey

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Published by: ndtvonline on Feb 20, 2013
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09/08/2013

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CHAPTER
1
1.2It is important to note here that during theimmediate past three years, the Indian economyhas been severely buffeted by, but has successfullywithstood, two shocks in rapid succession: (a) acollapse in world growth, finances, and trade withthe onset of the global financial crisis in 2007-09whose ripple effects continued into 2009-10 andpersisted into 2010-11 (with fiscal stresses inEurope); and (b) domestically, following a year of negative growth in agriculture and allied sectors in2008-09, erratic monsoons resulted in a severedrought in 2009-10 and unseasonal late rainsaffecting the winter season crops in 2010-11.1.3This period of economic stress has severelytested citizens and policymakers alike. Yet theIndian economy is coming through with resilienceand strength. While some clouds linger—such as
he Indian economy has emerged with remarkable rapidity from the slowdowncaused by the global financial crisis of 2007-09. With growth in 2009-10 nowestimated at 8.0 per cent by the Quick Estimates released on 31 January 2011 and8.6 per cent in 2010-11 as per the Advance Estimates of the Central Statistics Office(CSO) released on 7 February 2011, the turnaround has been fast and strong. Growthis strong in 2010-11(as per the Advance Estimates) with a rebound in agricultureand continued momentum in manufacturing, though there was a deceleration inservices caused mainly by the deceleration in community, social, and personal services,reflecting the base effect of fiscal stimulus in the previous two years. That there hasbeen a deceleration in industry and manufacturing, in particular, as indicated byindex of industrial production (IIP) data pertaining to November 2010 is a matterof some concern. However, buoyancy in other indicators of industrial performanceand the short-run nature of the IIP slowdown suggest that the deceleration is morein the nature of road bumps than indication of any long-run problem. The medium-to long-run prospect of the economy, including the industrial sector, continues to be positive. On the demand side, a rise in savings and investment and pickup in privateconsumption have resulted in strong growth of the gross domestic product (GDP) atconstant market prices at 9.7 per cent in 2010-11. A sequenced and gradualwithdrawal of the monetary accommodation is helping contain inflationary pressures.Inflation which remained at elevated levels for a large part of the current fiscal waslargely driven by food items, though the goods that were inflating at the start of the fiscal year were different from the goods for which prices are rising now.Notwithstanding the tightening money markets and moderate growth in deposits,the financial situation remained orderly with a pickup in credit growth, vibrantequity market and stable foreign exchange market. A moderation in the currentaccount of balance-of-payments position is likely with deceleration in imports andacceleration in exports as per latest monthly merchandise trade data. Thoughdownside risks of global events, particularly movement in prices of commodities likecrude oil (exacerbated by political turmoil in the Middle East), remain, the Indianeconomy is poised to further improve and consolidate in terms of key macroeconomicindicators.
State of the Economyand Prospects
Website: http://indiabudget.nic.in
 
2
Economic Survey
 
2010-11
Website: http://indiabudget.nic.in
0.1 KEY INDICATORS
Data categories and componentsUnits2005-062006-072007-082008-092009-102010-111GDP and Related Indicators
GDP (current market prices)
 ` 
crore3692485429367249864265582623
PE 
6550271
QE 
7877947
 AE 
Growth Rate%13.916.316.112.017.320.3GDP (factor cost 2004-05 prices)
 ` 
crore3254216356601138989584162509
PE 
4493743
QE 
4879232
 AE 
Growth Rate%9.59.69.36.88.08.6Savings Rate% of GDP33.534.636.932.233.7naCapital Formation (rate)% of GDP34.735.738.134.536.5naPer Cap. Net National Income(factor cost at current prices)
 ` 
271233119835820406054649254527
2Production
FoodgrainsMn tonnes208.6217.3230.8234.5218.1
a
232.1
b
Index of Industrial Production
(growth)Per cent8.011.98.73.210.5naElectricity Generation (growth)Per cent5.27.26.42.86.0na
3Prices
Inflation (WPI) (12 month average)% change4.36.54.88.03.69.4
Inflation CPI (IW) (average)% change4.46.76.29.112.411.0
4External Sector 
Export Growth ( US$)% change23.422.629.013.6-3.529.5
e
Import Growth (US$)% change33.824.535.520.7-5.019.0
e
Current Account Balance (CAB)/GDPPer cent-1.2-1.0-1.3-2.3-2.8naForeign Exchange ReservesUs$ Bn.151.6199.2309.7252.0279.1297.3
Average Exchange Rate
 ` 
/ US$44.2745.2540.2645.9947.4245.68
5Money and Credi
Broad Money (M
3
) (annual)% change16.921.721.419.316.816.5
h
Scheduled Commercial Bank Credit(growth)% change30.828.122.317.516.924.4
h
6Fiscal Indicators (Centre)
Gross Fiscal Deficit% of GDP4.03.32.56.06.3
4.8Revenue Deficit% of GDP2.51.91.14.55.1
3.5Primary Deficit% of GDP0.4-0.2-0.92.63.1
1.7
7Population
Million110611221138115411701186(Year-wise projected propultion(2005)(2006)(2007)(2008)(2009)(2010)as on 1
st
Oct.)AE GDP figures for 2010-11 are advance estimates;
PE 
Provisional Estimates.
QE 
quick estimates.nanot yet available / released for 2009-10.
a
Final estimates.
b
Second advance estimates.
 The annual growth rates have been recompiled from 2005-06 onwards since the indices have been recompiled from April 04 onwards using newseried of WPI for the IIP items reported in value terms.
Average Apr.-Dec. 2010.
e
Apr.-Dec. 2010.
as of December 31, 2010.
Average exchange rate for 2010-11 (Apr.-Dec. 2010).
h
Provisional.
fiscal indicators for 2009-10 are based on the provisional actuals for 2009-10.
 
3
State of the Economy and Prospects
Website: http://indiabudget.nic.in
continued high food inflation and a temporaryslowdown in industrial growth the dynamism in overallgrowth is evident, even as a series of social protectionmeasures have considerably strengthened the abilityto withstand shocks. These results owe to thecounter-cyclical macroeconomic policies, structuralmeasures to promote growth, social spending toprovide a stronger foundation to protect the poor and,as always with economic progress, some luck inthe form of good weather and slow but steady recoveryof the global economy. In each of these areas,enormous progress was made during this crisis, andvaluable lessons learnt for the future.1.4The estimated level of growth in the GDP atconstant 2004-05 prices at factor cost (real GDP) in2010-11 was composed of: growth of 5.4 per cent inagriculture, which rebounded from a downturn in theprevious year; growth of 8.1 per cent in industry,which had a growth of 8.0 per cent in 2009-10; and adecelerated growth of 9.6 per cent in services asagainst 10.1 per cent in 2009-10 (Table 1.1). On thedemand side, the GDP at constant prices (2004-05)at market prices is estimated to grow by 9.7 percent. Four distinct facts emerge out of the recentmacroeconomic data. First, adjusted for the baseeffect on community, social, and personal services,the services sector with a share of 57.3 per cent in2009-10 has finally started to gather momentum andgiven the fact that it has been the power house of the Indian growth story, this portends well for themedium-term prospects. Second, the savings ratehas gone up to a level of 33.7 per cent and investmentrate is up to 36.5 per cent of the GDP in 2009-10,which, given the incremental capital-output ratio of about 4, indicates prospects of sustained outputgrowth. Third, there is a marked deceleration inindustry as per recent monthly IIP data, decline inimports and signs of headline inflation remaining atelevated levels given the geopolitical risks in MiddleEast. All these could have implications for slowingdown the momentum albeit in the short run. Fourth,fiscal policy is on the consolidation path withrevenues doing well on the strength of the reboundin economic activity and, going forward, this is likelyto yield growth dividends in the medium to long termsetting in motion a virtuous cycle.1.5Headline inflation, year-on-year, as measuredby the wholesale price index (WPI), remained atelevated levels from December 2009, even though ithas, by and large, been on a downward trajectorysince April 2010, when WPI inflation peaked at 11per cent year-on-year. Inflation stood at 8.23 per centin January 2011. The financial-year build-up (fromMarch 2010) remained at 7.44 per cent upto January2011. Inflation in primary articles, particularly foodarticles, was the main contributor to the elevatedlevels of WPI inflation. With diminishing base effect,there was gradual moderation in overall WPI inflationin November 2010 when it was placed at 7.48 percent; there was a rise again in December 2010, drivenmainly by certain food articles (fruits and vegetables,milk, egg, meat and fish) and also petroleumproducts. A series of steps, both structural andmacroeconomic, was taken to combat the rising foodinflation.1.6On the basis of weekly data on prices, inflationin food articles remained in double digits for 76 weeksfrom 5 June 2009; after briefly ruling below the double-digit mark for three weeks between 20 November2010 and 4 December 2010, it again was in doubledigits trending higher with inflation at 17.05 per centon 22 January 2011. Between 15 January 2010 and19 June 2010 it was ruling above 20 per cent in 22weeks out of 23. While food inflation had remainedhigh even last year, compositionally the higher
Table 1.1 : Growth in GDP at factor cost at 2004-2005 prices (per cent)
2005-062006-072007-082008-09
PE
2009-10
QE
2010-11
 AE 
Agriculture, Forestry & Fishing5.14.25.8-0.10.45.4Mining & Quarrying1.37.53.71.36.96.2Manufacturing10.114.310.34.28.88.8Electricity, Gas & Water Supply7.19.38.34.96.45.1Construction12.810.310.75.47.08.0 Trade, Hotels, Transport & Communication12.111.710.77.69.711.0Financing, Insurance, Real Estate & Business Services12.714.011.912.59.210.6Community, Social & Personal Services7.02.96.912.711.85.7GDP at Factor Cost9.59.69.36.88.08.6
Source : CSO.

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