Recently Economic Advisory Council to PM had published Economic Outlook for 2010-11. Some of the highlights of Economic Outlook for 2010-11 are :
- Economy to grow at 8.5 per cent in 2010-11 and 9.0 % in 2011-12
- Agriculture grew at 0.2% in 2009-10. Projected to grow at 4.5% in 2010-11 and 4.0% in 2011-12.
- Industry grew at 9.3% in 2009-10. Projected to grow at 9.7% in 2010-11 and 10.3 % in 2011-12.
- 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
- Investment rate is expected to be 37% in 2010-11 and 38.4% in 2011-12.
- 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
- 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.
- 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.
- 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.
- 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.
- The provisional headline inflation was above 10% in June 2010.
- Controlling high inflation rate essential for sustainable growth in medium term.
- 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.
- Credit off take picked up. Strong growth rate in the 1st quarter of 2010-11.
- Fund flow from capital market to commercial sector quite strong. Bond issuance growth relatively higher than issuance of equity.
- Liquidity conditions are taut enough for monetary policy signals to be appropriately transmitted to the financial sector. A bias toward tightening is necessary.
- Exchange rate variations will remain within acceptable range
- Exit from the expansionary fiscal policy not only feasible but also necessary
- High buoyancy in direct and indirect tax collections. Telecom auctions and decontrol of the petroleum products prices to provide additional cushion.
- Fiscal deficit outturn may be lower than the budgeted consolidated fiscal deficit of 8.4% of GDP for 2010-11.
- Revenue Deficit as a ratio of GDP expected to decline from 6.3% in 2009-10 to 4.6% in 2010-11.
- Operationalization of Goods and Services Tax (GST) should be a priority
- Budgeted level of Fiscal Deficit and Revenue Deficit still beyond comfort zone
- Need to rationalize the food and fertilizer subsidies.
- To sustain a growth rate of 9.0 per cent, focus is required on:
- Containing inflation
- Improving farm productivity
- Closing the large physical infrastructure deficit, especially in the power sector
GDP Growth – Actual & Projected
| 2004/05 | 2005/06 | 2006/07 | 2007/08 | 2008/09 | 2009/10 | 2010/11 | 2011/12 | |
| Merch. Exports
Merch. Imports |
85.2
118.9 |
105.2
157.1 |
128.9
190.7 |
166.2
1257.6 |
189.0
307.7 |
182.2
299.5 |
216.1
353.9 |
254.0
414.3 |
| Merchandise Trade
Balance |
–33.7
–4.7% |
–51.9
–6.2% |
–61.8
–6.5% |
–91.5
–7.4% |
–118.7
–9.7% |
–117.3
–8.9% |
–137.8
–9.0% |
–160.3
–9.3% |
| Net Invisible
Earnings |
31.2
4.3% |
42.0
5.0% |
52.2
5.5% |
75.7
6.2% |
89.9
7.4% |
78.9
6.0% |
96.0
6.3% |
109.7
6.4% |
| o/w ITES
Private Remittances Investment Income |
14.7
20.5 -4.1 |
23.8
24.5 -4.1 |
27.7
29.8 -6.8 |
37.2
41.7 -4.4 |
44.5
44.6 -4.0 |
41.3
52.1 -6.4 |
46.2
58.3 -6.5 |
53.1
67.0 -6.5 |
| Current Account
Balance |
–2.5
–0.3% |
–9.9
–1.2% |
–9.6
–1.0% |
–15.74
–1.3% |
–28.7
–2.4% |
–38.4
–2.9% |
–41.8
–2.7% |
–50.7
–2.9% |
| Foreign Investment | 13.0 | 15.5 | 14.8 | 45.0 | 3.5 | 52.1 | 55.0 | 65.0 |
| o/w FDI (net)
Inbound FDI Outbound FDI |
3.7
6.0 2.3 |
3.0
8.9 5.9 |
7.7
22.7 15.0 |
15.4
34.2 18.8 |
17.5
35.0 17.5 |
19.7
31.7 2.0 |
30.0
50.0 20.0 |
30.0
55.0 25.0 |
| Portfolio capital
Loans Banking capital Other capital |
9.3
10.9 3.9 0.7 |
12.5
7.9 1.4 1.2 |
7.1
24.5 1.9 4.2 |
29.6
41.9 11.8 9.5 |
-14.0
4.1 -3.2 4.5 |
32.4
11.9 2.1 -12.7 |
25.0
16.8 0 0 |
35.0
24.5 0 0 |
| Capital Account
Balance |
28.0
3.9% |
25.5
3.0% |
45.2
4.8% |
108.0
8.8% |
8.7
0.7% |
53.6
4.1% |
72.8
4.8% |
90.5
5.3% |
| Errors & Omissions
Accretion to Reserves |
0.6
26.2 3.6% |
–0.5
15.1 1.8% |
1.0
36.6 3.9% |
1.2
92.2\ 7.5% |
1.1
–18.9 –1.5% |
–1.7
13.4 1.0% |
–
30.9 2.0% |
–
39.8 2.3% |
