assocham national economic affairs council weathering the current economic turmoil - immediate...

ASSOCHAM National Economic Affairs Council

Weathering the Current Economic Turmoil - Immediate Policy Agenda

MC Meeting, 4th September 2013

ASSOCHAM National Economic Affairs Council 2

Dimensions of Current Turmoil

GDP growth: 4.4% (Q1: 2013-14)

(Manufacturing: -1.2%, Services: 6.6%, agrl.:2.7%)

GDP growth: 9.5% in 2010-11, 6.2% in 2011-12, 5 % in 2012-

13.

Wage growth surpassed labour productivity growth during

2008-09 to 2010-11, possibly adding to inflation pressures

Contd..


Dimensions of Current Turmoil (contd..)

The short fall of domestic savings to domestic investments

i.e., savings-investment gap, increased from -1.3% in 2007-

08 to -4.2 percent in 2011-12.

Value of industrial investments proposed came down to Rs.

3.2 lakh crore between Jan-July 2013 as against Rs. 4.4 lakh

crore in Jan-July 2012

Thus, the effect of industrial reforms, introduced in 1990s, has by now visibly faded.


Main Causes of Current Turmoil

Fiscal Deficit: 4.9% of GDP( 2012-13). Actuals stood at 62.8% of the budgeted fiscal deficit between April-July 2013.

The benchmark 10 year Government security yield is hovering at 8.6 percent.

The Current Account Deficit stood at unsustainable level of 4.8% of GDP during 2012-13.

Retail inflation is still hovering at double digit level.


Main concerns

Increasing fiscal deficit owing to high revenue deficits that are largely financed by borrowings

Low business confidence due to lack of transparent and predictable government policies

Skewed inflation where costs input costs are increasing at a higher rate than that of output prices

Growing import dependency and high currency volatility causes of concern.

High transaction costs and need for process reforms


Well Known Policy Solutions

Reviving Business confidence

Creating strong supply response

Fiscal stimulus to revive investments

Boosting public investment to crowd in private investment

Fiscal prudence

Revisiting Manufacturing and Exports Strategies


Formulating policy recommendations with the objective of:

Identifying the short-term policy measures having immediate visible effect on economic growth.

Short-term policy recommendations in terms of ‘Dos’ and ‘Don'ts’

What does industry need immediately so that their top and bottom lines improve?

Current Agenda


Specific Focus Areas

Investment and Capital Inflows

Industry and Manufacturing

Infrastructure

Services

Foreign Trade

Fiscal Policy

Monetary Policy


Provide your invaluable inputs on urgent basis in line with the purpose

Making this initiative relevant

Need of the Hour


Thank You

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