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F inance Minister PranabMukherjee tabled the EconomicSurvey 2011-12 in Parliament on15th of March, stating the Gross Domestic

Product (GDP) is likely to grow 7.6percent in FY13. The growth rate of real GDP (is expected) to pick up to 7.6percent (plus or minus 0.25 percent ) in2012-13 and faster beyond that, saidPranab Mukherjee in Parliament. Itexpects the economic growth to furtherimprove to 8.6 percent in 2013-14. TheSurvey said fiscal consolidation is likelyto get back on t rack from 2012-13, whensavings and capital formation will alsobegin to improve. Moreover, with theeasing of inflationary pressure in themonths to come, there could bereduction in policy rates by the RBI, whichwould encourage investment that couldhave a posit ive impact on growth, itadded. Indian econom y is likely to slowdown to 6.9 percent in 2011-12 from 8.4percent in the previous two years mainlyon account of global slowdown anddomest ic factors. There were also thepressures of democratic politics, which

slowed reforms, the Survey said whileendorsing the Central StatisticalOr ganisations (CSO) est imate of 6.9percent growth during 2011-12. Indiaseconomic growth slowed to its weakestannual pace in almost three years in thethree months to December, as highinterest rates and rising input costs

constrained investment andmanufacturing, government data releasedearlier showed. GDP rose 6.1 percent inOctober to December compared with a

year earlier. That marked a sharppullback from 6.9 percent growth in Julyto September and was the seventhsuccessive quarterly slowdown.

The slowdown in Indian economywas attributed largely toweakening industrial growth. Theindustrial sector has performed poorly,retreating to a 27% share of the GDP.The services sector however continued tobe a star performer as its share in GDPclimbed from 58% in 2010-11 to 59% in2011-12 with a growth rate of 9.4%.Agriculture and allied sectors wereestimated to achieve a growth rate of 2.5% in 2011-12. Agriculture & alliedsectors were are estimated to achieve agrowth rate of 2.5% in 2011-12 withfoodgrains production likely to cross250.42 million tones as a result of increase in the production of rice in anumber of states. Overall growth duringApril-December 2011 reached 3.6%

compared to 8.3% in the correspondingperiod of the pr evious year. The fiscal2011-12 was marked by asharp depreciation of the Indian rupee .In the current fiscal 2011-12, on month-to-month basis the rupee depreciated by12.4 per cent from 44.97 per US dollarin March 2011 to 51.34 per US dollar in

January 2012. Rupee reached a peak of 43.94 on 27 July 27 2011 and lowest at54.23 per US dollar on 15 December2011 indicating a depreciation of 19 per

cent. The RBI was required to sell dollarstwice in the fiscal to help raise the valueof the rupee. Also in 2011-12 Indiasexternal debt stock increased by US $20.2 billion (6.6 per cent) to US $ 326.6billion at end-September 2011 vis--visUS $ 306.4 billion at end-March 2011,primarily due to higher commercialborrowings and short-term debt.

The Labour Bureau conductedtwelve quarterly quick employmentsurveys to assess the impact of theeconomic slowdown on the employmentsector. The surveys indicated an upwardtrend in employment since July 2009 wasmaintained. Overall employment inSeptember 2011 over September 2010increased by 9.11 lakh, with the highestincrease recorded in IT/ BPO (7.96 lakh)sector. The coverage underthe MGNREGA consistently increasedfrom 4.51 crore households during 2008-09 to 5.49 crore households during 2010-

11 with averaged employment of 47persondays per household. Average wageincreased from Rs 65 in 2006-07 to Rs.100 in 2010-11. The Survey stated thatto strengthen transparency andaccountability in the implementation of the MGNREGA, the Governmentinitiated a service delivery project for
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Information and CommunicationTechnology (ICT) and biometrics relatedworks of the MGNREGA on PPP basis.

The real GDP growth is expectedto p ick up to 7.6% in 2012-13 and 8.6%

in 2013-14 as per the survey. PranabMukherjee predicted 7.6% GDP growthin 2012-13. As per the survey, given thatfiscal consolidation is back on track,savings and capital formation should islikely to start rising. Also the RBI policyrates are expected to be reduced in theback of easing of inflationary pressures.The lowered interest rates will encourageinvestment activity and have a positiveimpact on growth.

These projections were all made onthe basis of assumptions regardingfactors like normal monsoons,reasonably stable international prices,part icularly oil prices, and global growth.The progressive deregulation of interestrates on savings accounts is expected toraise financial savings and thus improvetransmission of monetary policy.

Sustainable development andclimate change were recognized by thesurvey as central areas of global concern.The Survey suggested need to examinethe linkages and trade-offs betweenpolicy rate changes and inflation in theIndian context, for better calibration of monetar y policy. The Economic Survey2011-12 stated that it was essential tomake lower carbon sustainable growth acentral element of our Twelfth Five YearPlan commencing in April 2012.

The Economic Survey inconclusion mentioned that India is more

closely integrated with the worldeconomy as its share of trade to GDP of goods and services tripled between 1990-2010. The extent of financial integration,measured by flows of capital as a share of GDP also increased leading to anexpansion of Indias role in the worldeconomy.

Following are the highlights of Econom ic Survey 2011-12 :

v Rate of growth estimated to be 6.9%in FY 12

v Outlook for growth and stability

promisingv Real GDP growth expected at 7.6%

in FY 13v GDP pegged at 8.6% in FY 14v Agriculture grows at 2.5 % growth

in FY 12v Services grow at 9.4 %, in FY 12,

share in GDP at 59%v Industrial growth pegged at 4-5 %

in FY 13v Industry expected to improve as

economic recovery resumesv Inflation on WPI was high, butshows signs of moderation

v Inflation moderation likely to spurinvestment

v WPI food inflation dropped from20.2% in February 2010 to 1.6% inJanuary 2012

v Calibrated steps initiated to containinflation

v India remains among the fastestgrowing economies of the world

v Indias sovereign cred it rat ing roseby 2.98 percent in 2007-12

v Fiscal consolidat ion on track v Savings & Capital Formation

expected to r isev Exports grew at 40.5% in H1v Imports grew by 30.4% in H1v Foreign trade performance key

driver of growthv Forex reserves enhanced, cover

nearly the entire external debt stock v Central spending on social services

up at 18.5% in FY 12 Vs 13.4% FY07

v MNREGA coverage of 5.49 crorehouseholds in FY 11

v Sustainable development andclimate change high priority

v Tenuous global economic

environment turned sharplyadverse in Septem ber, 2011

v Euro-zone c risis responsible forinternational downturn

v Slowdown of Indian economy due

to global, domestic factorsv Decline in overall investment rate

cause for slow recoveryv Gross capital formation in Q3 of FY

12 as a rat io of GDP at 30%, downfrom 32% in FY 11

v Global economy remains fragile;efforts needed through G-20 forstability

v Progressive deregulation of interestrates on savings accounts

recommendedv Deregulation of interest rates onsavings accounts to help raisefinancial savings and improvetransmission of monetary policy

v Need deepening of domesticfinancial markets, especiallycorporate bond market

v Efforts on to attract dedicatedinfrastructure funds

v Indias foreign trade per formancekey driver of growth

v Balance of Payments widens toUSD 32.8 bn in H1 of FY 12 VsUSD 29.6 bn FY 11

v Forex reserves up from USD 279bn in March 10 to US USD 305 bnin March11

v India now more closely integratedwith the world economy

v Indias share of trade to GDP of goods and services in world tr ipledin 1990-2010

v Indias flows of capital as a share of GDP in word increaseddram atically in last two decadesInflation

v Inflation to moderate further in FY13

v Renewed focus on supply sidemeasures essential for price stability


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v Inflation expected to m oderate at6.5-7% by March end

v Gap between WPI and CPI inflationnarrows in FY 12

v Milk, eggs/meat/fish, gram & edible

oils major dr ivers of food inflationv Monetary policy measures taken to

contain inflationv Substantial Monetary policy

challenge to rein-in inflationv RBI addressed liquidity concernsv Monetary market remained orderly

in FY 12 2011-12v Need to examine linkages between

policy rate changes and inflationv Threat from asset pr ice bubbles in

real estate and stock marketsv Scope to further sharpen monetarypolicy and use macro prudential todeal with above said threats

v Unexpected shocks such as oilprices remain inflationary threats

v High level of food st ocks to h elpmaintain overall price stability

MEASURES FOR PRICE

STABILITY IN FOOD ITEMS

v Need guidance for farmers onfertilizers, insecticide, alternatecropping patterns

v Need st rategy, regular import s of agriculture commodities in smallerquantities

v Need to set up special markets forspecial crops

v Improve Mandi governancev Need to promote interstate tradev Perishable food items should be

taken out of ambit of the APMC

Actv FDI in multi brand retain will fill

infra gap during harvest periodv Need to step up creation of modern

stores facilities for food grainsAgriculture

v FDI in multi-brand retailrecommended

v Higher levels of agricultural outputaugur well

v Concerns over growth rate in agrisector falling short of target

v Agriculture grows at 2.5% Vs target

of 4% in five yr planv Agriculture, allied activities account

for 13.9 % of GDP in FY 12v Foodgrains stocks at 55.2 million

tonnesv Product ion of foodgrains in FY 12

estimated at 250.42 million tonesv Speedy improvement in yield

through adequate investment inR&D needed

v Agri infra pr iority areav

Agri outlook for next fiscal brightIndustryv Industrial growth pegged at 4-5%

in FY 12v Industrial growth less than recent

past and far below potent ialv Need to boost business sentiments,

encourage investment and identifybottlenecks

v Industrial sector expected torebound during next financial year

v Industry expected to rebound with

inflation easing, moderation incommodities prices in internationalmarket and revival of manufacturing performance

v Long term average annual growthof industries comprising mining,manufacturing and electricityremain aligned with overall GDPgrowth rate

v Employment in Industry increasefrom 16.2% in 1999-2000 to 21.9%in 2009-10 largely due tpconstruction sector

v Contraction in production in themining sector, part icularly in coaland natural gas segments

v Electricity sector witnessedimprovement

v Basic goods and non-durablesgoods grew at 6.1%

v Moderation in growth in othersegments of IIP

v Negative growth observed in capitalgoods and intermediates segments

v Gross Capital Formation in

industry as percent to the overallGCF moderated to 48.3% in FY 11

v Manufacturing GCF growth r atedeclined to 7% in FY 11 Vs 42% inFY 10

v Moderation in rate of growth of credit in infrastructure andmanufacturing sectors

v Need to address land acquisitionand infra issue on priorityServices Sector

v

Services sector proves saviourduring global crisisv Services grow by 9.4% despite

slowing GDP growthv Share of services in GDP at

increased from 55.1% in FY 11 to56.3% in FY 12

v Financial & non-financial services,IT, Telecomm, Real Estateconstituted 41.9 % of total FDIequity inflows during April 2000-December 2011

v FDI inflows to the Services Sectorslowed down FY 10 & FY 11,dipping to negative zone

v FDI inflows in FY 12 recovered;increased by 36.8 % to USD 9.3billion (April-Dec)

v Slight moderation in servicesgrowth no cause of worry

v Moderation due to the steep fall ingrowth of public administrationand defence services reflecting fiscal

consolidationv Growth in trade, hotels and

restaurants robust at 11.2%v Retail-sector growth expected to be

even more robust in FY 13v Worry areas include real estate

ownership of dwellings andbusiness services segment


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v Software service exports steady;face threat from Eurozone

TRADE

v Indias exports grew at 23.5% to

reach USD 242.8 bn in April 2011- Jan 2012

v Exports decelerated in Oct-Nov dueto global downturn; recovered inDec-Jan

v Key performers in export -petroleum and oil products, gemsand jewellery, engineering, cottonfabrics, electronics, readymadegarments, drugs

v Imports up 29.4% during April - Jan

2011-12 at USD 391.5 bnv Key import areas -POL (petroleum,

oil and lubricant), gold and silverv Trade deficit in April-Jan 2011-12

at USD148.7 bn Vs USD 105.9billion in last fiscal

v Diversification of export andimport m arkets a success

v UAE Indias largest trading partner,followed by China

v Indias services expor ts bounceback after contr action in FY 10

v Indias services expor ts grew 38.4% to USD 132.9 bn in FY 11

v Growth in export of servicesmod erated in H1 FY 12 to 17.1%

v Software exports may show somesluggishness

v Trade challenges include globalsituation, systemic problems

v Fur ther diversification of Ind iasexport basket needed

v Facilitate trade by removing

procedural delays, red tapev Infrastructural bottlenecks need to

be removedv Total investment in SEZs till 31 Dec

2011 at Rs. 2,49,630.80 crorev Formal approvals granted for

setting up of 583 SEZs of which 380notified

v Forex Reserves at USD 293 bnv External Debt Stock at USD 326

bnv Oil, Gold and Silver prices

contribute to modest rise in current

account deficitv Net capital flows at USD 41.1 billion

(4.5% of GDP) in the H1 of FY 12v External commercial borrowing at

USD 10.6 billion in H1 of FY 12v Portfolio investment shows large

decrease in inflow to USD 1.3 bn inH1 of FY 12

v Trade deficit more than 8 % of GDPand current account deficit morethan 3 % sign of growing imbalance

in BOPv High share of volatile FFI flowsadded external shock Infrastructure

v Performance of broad sectors andsub sectors in key infrastructureareas presents mixed picture

v Achievements in certaininfrastructure sector remarkable

v Need to attract large scaleinvestment into infrastructure

v Public-Private Partnershipsuccessful model

v PPPs expected to augment resourceavailability, improve efficiency

v Investment requirement at USD 1trillion during Twelfth Plan

v 50% investment to come fromprivate sector as against the 36%anticipated

v Financing infrastructure a bigchallenge

v Improvement in growth in power,

petroleum refinery, cement , railwayfreight traffic, passenger handled

v Coal, Natural Gas, Fertilizers,handling of Export Cargo at airportsand number of cell phoneconnect ions show negative growth

v Steel sector witnesses moderationin growth

v Core and infrastructure sector st illdepends on public sector projects

v Delays increase project risk andcost, and need to be minimized

v Credit growth to infrastructure

sector turned negative in FY 12v Incremental credit flow to the infra

sector in April-December 2011nearly 61% in same period yearbefore

v Reduction in cred it flow in powerand telecom sectors

v Total FDI inflows into majorsinfrastructure sectors during April-December 2011 registered growthof 23.6%

v

Challenges on form p lateauing of the domestic savings and macroavailability of resources

v Need for innovative schemes toattract large-scale investment intoinfrastructure

v Strengthening domestic financialinstitutions and development of long-term bonds market criticalRupee

v Rupee falls by 12.4 % against USDv Rupee falls from 44.97 per USD in

March 2011 to 51.34 per USD inJanuary 2012

v Rupees high volatility impairsinvestor confidence

v Aggressive stand to check Rupeevolatility recommended

FINANCIAL MARKETS

v Volatility in global financial marketslikely to t ighten availability and costof foreign funding

v Government measures mitigateliquidity stress

v Indian banks robust amidstEurozone crisis

v Financial infrastructure continuesto function without any majordisruption

v Indian financial markets, especially


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currency and equity, performedunder pressure in FY 12

v Global market turm oil caused risk aversion and moderation in capitalinflows

v Countervailing steps helpedmitigate strains

v Global situation, rising tradeimbalance, pace of reform initiativesto boost capital flows

v Domestic growth concerns likely toinfluence financial marketsmovements

v Concerns over Greeces sovereigndebt problem spreading to India

v Banking business may become

more complex and riskier in futurewith greater global integrationv Risk and liquidity management, skill

enhancement necessaryv Need to maintain sustainable levels

of external debtv Need innovative steps to bring

corporate bond market at thecentrestage

v Infrastructure financing andfinancing of unorganized micro/ small business sector neededBanking and Micro Finance

v Public sector banks show 19 %growth in priority sector lending

v Credit Disbursement to agri sectorexceeded target by 19 %

v Credit Disbursement helped over12.7 mn new farmers

v 98 % public sector bank branchesfully comput erised

v Self Help Group- bank linkageprogramme major success

v Capital in banks essential forbalance sheet expansion

v Rs 12,000 provided in FY 12 for

capital infusion in public sectorbanks

v Growth in bank credit extended byScheduled Commercial Banks grewat 17.1%

v Flow of agricultural creditimpressive

v Infrastructure Debt Funds tofacilitate flow of funds intoinfrastructure projects

v Resource mobilization through

primary market shows sharpdecline in FY 11Environment and Climate Change

v Lower carbon sustainable growth tobe central element of 12th plan

v Indias per capita CO2 emissionsmuch lower than those of developedcountries even if historicalemissions are excluded

v Need for more sensitivity fromdeveloped countries to carbonemissions

v Economic pricing of energy, newtechnologies to be the key

v India has taken voluntary actions topursue sustainable developmentstrategy

v Warming planet may cause adverseeffects, extreme weather events

v India has stepped up protection of its natural environment, forests

v Five main challenges includeclimate change, food security, watersecurity, energy security andmanaging urbanization

v Broad-based economic and social

development answer for greatersustainabilityEducation and Employment

v Reform process in educationcontinued IN FY 12

v Aakash, low cost computing devicelaunched

v Sarva Shiksha Abhiyan normsrevised to correspond with theprovisions of the RTE Act

v National Council for Teacher

Education notified as the academicauthority for teacher qualificationsv Number of out-of-school children

down from 134.6 lakh in 2005 to81.5 lakh in 2009

v Need to scale up the successfulcentres of innovations, create highertechnical institutions

v Labour Bureau Survey indicatesupward trend in employment sinceJuly 2009 maintained

v Employment in organized sectorincreased by 1.9 % in 2010

v Share of women in organized-sector employment at 20.4% in2010 March end

v MGNREGA: Coverage increases to5.49 crore households in 2010-11

v Government sets up committee fordeveloping index for fixingMGNREGA wage rates


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