Economic Survey: 2013/14 GDP growth pegged at 6.1-6.7 per cent

The finance ministry on Wednesday released the Economic Survey 2012-13, a day before Finance Minister P Chidambaram unveils the budget. Here are the highlights:

• Free legal services benefit more than 7.82 lakh persons from 1st April, 2012 to 31st October, 2012
• Expenditure on social services increased considerably in 12th Plan
• Upward trend in employment maintained; Overall employment increased by 6.94 lakh in June 2012 over June 2011
• Economic Survey acknowledges benefits of market diversification
• Measures taken by government to protect consumers from price rise 
• Rs 12,517 cr capital to be infused in PSB'st to augment their Tier-1 Capital
• Fast agricultural growth remains vital for jobs, incomes and food security
• Raising tax to GDP ratio to more than 11 pc critical for sustaining fiscal consolidation
• Robust Inflow of FDI in the Services Sector
• Chandigarh tops with highest share of services in GSDP with 85%
• India has highest increase in share of services in GDP at 8.1%
• Govts key initiatives to boost manufacturing 
• Government to raise Rs 40,000 cr through disinvestment  
• Growth outlook for developed nations uncertain
• Higher agri output to lower inflation
• Employment rose 1.6% in the last decade
• Direct cash transfer to curb leakages
• Pegs FY14 GDP growth rate at 6.1 to 6.7 per cent
• Oil subsidy key fiscal risk
• Reforms should be accelerated to boost growth
• Foreign Exchange reserves remains steady at $295.6 bn at Dec 2012 end
• Need to cut impediments for investment
• Tax base should be increased
• 5.3% fiscal deficit target achievable
• WPI inflation may decline to 6.2-6.6%
• Railway freight grows by 5.1 per cent in 2012-13
• Need to cut subsidy and leakages
• IIP growth may remain sluggish
• Room to increase exports limited
• Need to curb gold imports
• Recent steps to boost FY14 outlook
• Diesel price hike to put upward pressure on inflation
• Lower inflation to create room for rate cuts
• Food subsidy bill to increase subsidy
• Trade deficit, CAD a matter of concern
• Fiscal consolidation key to high growth
• WPI inflation to continue to moderate
•  

 ABDUL WAHEED
PGDM 2nd SEM
IIMT COLLEGE OF MANAGEMENT

he government had pegged the fiscal deficit, an indicator of public finances, at 5.1 per cent for the Gross Domestic Product (GDP) for 2012-13. Chidambaram later revised it to 5.3 per cent in view of rising expenditure and s - See more at: http://www.indianexpress.com/news/economic-survey-2013-paints-sombre-picture-of-economy-lowers-growth-to-5-/1080498/2#sthash.i5x1tokO.dpuf

Painting a not-so-rosy picture of the economy, the pre-Budget Economic Survey today spoke of the "danger" of missing fiscal targets in the current year which may clock only 5 per cent growth against the projected 7.6 per cent and made a case for widening of tax base and cutting of subsidies.
Against the backdrop of speculation over proposals for taxing super-rich and on inheritance, the Survey cautioned against raising taxes.
The Survey, tabled by Finance Minister P Chidambaram in Parliament, projected an optimistic growth rate of 6.1-6.7 per cent for the 2013-14 claiming that the downturn is more or less over and economy is looking up.
The economic growth rate in the current financial year is expected to slip to decade's low of 5 per cent from 6.2 per cent in 2011-12 and 9.3 per cent a year before that.
The Survey last year had projected the growth rate for 2012-13 at 7.6 per cent.
"These are difficult times but India has navigated such times before and with good policies it will come through stronger," Chief Economic Advisor Raghuram G Rajan, the lead author of the Survey, told the media later.
In order to meet the challenges of the economy, he prescribed shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, besides making efforts to reduce cost of funds.
On the issue of rising subsidy bill, the Survey said, "the danger that fiscal targets would be breached substantially become very real in the current year".
- See more at: http://www.indianexpress.com/news/economic-survey-2013-india-growth-projected-at-6.16.7--likely-to-hit-fiscal-deficit-of-5.3-/1080498/#sthash.MBeVKqJM.dpuf

Painting a not-so-rosy picture of the economy, the pre-Budget Economic Survey today spoke of the "danger" of missing fiscal targets in the current year which may clock only 5 per cent growth against the projected 7.6 per cent and made a case for widening of tax base and cutting of subsidies.
Against the backdrop of speculation over proposals for taxing super-rich and on inheritance, the Survey cautioned against raising taxes.
The Survey, tabled by Finance Minister P Chidambaram in Parliament, projected an optimistic growth rate of 6.1-6.7 per cent for the 2013-14 claiming that the downturn is more or less over and economy is looking up.
The economic growth rate in the current financial year is expected to slip to decade's low of 5 per cent from 6.2 per cent in 2011-12 and 9.3 per cent a year before that.
The Survey last year had projected the growth rate for 2012-13 at 7.6 per cent.
"These are difficult times but India has navigated such times before and with good policies it will come through stronger," Chief Economic Advisor Raghuram G Rajan, the lead author of the Survey, told the media later.
In order to meet the challenges of the economy, he prescribed shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, besides making efforts to reduce cost of funds.
On the issue of rising subsidy bill, the Survey said, "the danger that fiscal targets would be breached substantially become very real in the current year".
- See more at: http://www.indianexpress.com/news/economic-survey-2013-india-growth-projected-at-6.16.7--likely-to-hit-fiscal-deficit-of-5.3-/1080498/#sthash.MBeVKqJM.dpuf

Painting a not-so-rosy picture of the economy, the pre-Budget Economic Survey today spoke of the "danger" of missing fiscal targets in the current year which may clock only 5 per cent growth against the projected 7.6 per cent and made a case for widening of tax base and cutting of subsidies.
Against the backdrop of speculation over proposals for taxing super-rich and on inheritance, the Survey cautioned against raising taxes.
The Survey, tabled by Finance Minister P Chidambaram in Parliament, projected an optimistic growth rate of 6.1-6.7 per cent for the 2013-14 claiming that the downturn is more or less over and economy is looking up.
The economic growth rate in the current financial year is expected to slip to decade's low of 5 per cent from 6.2 per cent in 2011-12 and 9.3 per cent a year before that.
The Survey last year had projected the growth rate for 2012-13 at 7.6 per cent.
"These are difficult times but India has navigated such times before and with good policies it will come through stronger," Chief Economic Advisor Raghuram G Rajan, the lead author of the Survey, told the media later.
In order to meet the challenges of the economy, he prescribed shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, besides making efforts to reduce cost of funds.
On the issue of rising subsidy bill, the Survey said, "the danger that fiscal targets would be breached substantially become very real in the current year".
- See more at: http://www.indianexpress.com/news/economic-survey-2013-india-growth-projected-at-6.16.7--likely-to-hit-fiscal-deficit-of-5.3-/1080498/#sthash.MBeVKqJM.dpuf

Economic Survey: Worst over for India, but future uncertain

Economic Survey says growth to recover to 6.1-6.7% range next fiscal, but highlights issue of jobless growth

New Delhi: For the second year in a row, the annual economic survey has maintained that the worst is over for the Indian economy, this time with the caveat that higher growth is contingent on the government following through with key policy actions to address structural flaws.

Presented to Parliament a day before finance minister P. Chidambaram presents the Union Budget, the Economic Survey of 2012-13 forecast that the economy should recover to a growth pace ranging between 6.1% and 6.7% in the next financial year.

The document, which is a diagnosis of the adverse state of the economy in the current fiscal, unambiguously identifies the structural constraints facing the Indian economy and argues that bold policy initiatives are an imperative, not an option, to ensure the forecast is realized.

It has effectively argued that policy inaction is the downside risk to the economy.

In a break with the past, the Economic Survey has devoted an entire chapter on the critical issue of the economy being unable to generate jobs despite record growth. “Because good jobs are both the pathway to growth as well as the best form of inclusion, India has to think of ways of enabling their creation.”

Setting the agenda, the survey said the only way to start a virtuous circle lies in “shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, in part through structural reforms, combating inflation both through monetary and supply-side measures, reducing the costs for borrowers of raising financing, and increasing the opportunities for savers to get strong real investment returns”.

Raghuram Rajan, the chief economic adviser who took charge in August, later told reporters at a press conference, “There are no silver bullets here. There are lots of things that we need to do that will start us on the path of macroeconomic stabilization, which will instill confidence both in financial and real investors.”

The Indian economy is projected to slow to 5% growth in the year to 31 March, the slowest pace in a decade, burdened by regulatory hurdles for infrastructure investments, higher interest rates and global economic crisis.

The survey pointed out that with the ongoing private sector deleveraging and government fiscal consolidation in developed economies, the global economy is likely to post a “very moderate” recovery in 2013 and would only gather steam in 2014. The survey said India cannot take the external environment for granted and has to move quickly to restore domestic balance. “What is important is to recognize that a lot needs to be done, and the slowdown is a wake-up call for increasing the pace of actions and reforms,” it said.

Rajan said India is in a difficult situation, but not an impossible one. “The bigger issue is whether we have a good handle on the underlying circumstances of the economy and the necessity for the policy to rectify that.”

The survey, however, seemed to be against raising income-tax rates or the imposition of a super-rich tax. “Of course, it is much better to achieve a higher tax-GDP (gross domestic product) ratio by broadening the base that is taxed rather than increasing marginal tax rates significantly—higher and higher tax rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion,” it held.

C. Rangarajan, chairman of the Prime Minister’s economic advisory council, had mooted a higher tax rate for the super rich to compensate for falling tax revenue collections.

India’s tax-GDP ratio, after reaching a peak of 11.9% in 2007-08, declined to 9.6% in 2009-10 and was at 9.9% in 2011-12.

“Raising the tax-GDP ratio to above the 11% level is critical for sustaining the process of fiscal consolidation in the long run,” the survey said.

Making a case for the Reserve Bank of India to lower interest rates further to enable a pick-up in investment and consumption, the survey said the central bank should link its monetary policy to the behaviour of the less-volatile non-food manufacturing inflation, or core inflation.

“To the extent that monetary policy has limited influence over certain aspects of inflation such as food prices, it may be appropriate for monetary policy to set rates based on what it can influence,” the survey said.

Advocating expenditure reforms, the survey said the fiscal deficit should be reduced by shrinking wasteful and distortion-inducing subsidies while protecting Plan expenditure, given the large unmet development needs. Chidambaram has promised to keep the fiscal deficit at 5.3% of GDP in 2012-13 and bring it down to 4.8% in the next fiscal.

Measures highlighted in the Economic Survey may resonate in the Union Budget on Thursday, said Madan Sabnavis, chief economist at Care Ratings.

“This environment has warranted the government to reduce spending to anchor inflation, facilitate corporate and infrastructure spending to ease supply and work towards fiscal consolidation. Going forward, these steps would need to be pursued with greater fervour,” he added.

The survey stressed the need for creating more productive jobs, especially in the organized manufacturing sector, to meet growing aspirations of the youth. It estimated that nearly half the additions to India’s labour force in 2011-30 will be in the 30-49 age group.

“The survey has raised some very valid concerns. Joblessness is a key issue and the government needs to focus its energies on generating employment,” said Rajesh Chakrabarti, executive director, Bharti Institute of Public Policy, and a faculty member at the Indian School of Business.

“There is a need to create jobs for our burgeoning population. The job creation numbers show that some of the government’s strategies surrounding employment generation like the skill development strategy have not worked,” he added.

Avinash kumar

PGDM 2nd sem.

Economic Survey: Worst over for India, but future uncertain

Economic Survey says growth to recover to 6.1-6.7% range next fiscal, but highlights issue of jobless growth

First Published: Wed, Feb 27 2013. 12 36 PM IST

In a pragmatic assessment, the first being overseen by newly appointed chief economic adviser Raghuram Rajan, the survey concedes that the economy is facing structural problems and the key policy priorities are to fight inflation, curb fiscal profligacy and generate jobs. Photo: Mint

Updated: Thu, Feb 28 2013. 09 27 AM IST

New Delhi: For the second year in a row, the annual economic survey has maintained that the worst is over for the Indian economy, this time with the caveat that higher growth is contingent on the government following through with key policy actions to address structural flaws.

Presented to Parliament a day before finance minister P. Chidambaram presents the Union Budget, the Economic Survey of 2012-13 forecast that the economy should recover to a growth pace ranging between 6.1% and 6.7% in the next financial year.

The document, which is a diagnosis of the adverse state of the economy in the current fiscal, unambiguously identifies the structural constraints facing the Indian economy and argues that bold policy initiatives are an imperative, not an option, to ensure the forecast is realized.

It has effectively argued that policy inaction is the downside risk to the economy.

In a break with the past, the Economic Survey has devoted an entire chapter on the critical issue of the economy being unable to generate jobs despite record growth. “Because good jobs are both the pathway to growth as well as the best form of inclusion, India has to think of ways of enabling their creation.”

Setting the agenda, the survey said the only way to start a virtuous circle lies in “shifting national spending from consumption to investment, removing the bottlenecks to investment, growth and job creation, in part through structural reforms, combating inflation both through monetary and supply-side measures, reducing the costs for borrowers of raising financing, and increasing the opportunities for savers to get strong real investment returns”.

Raghuram Rajan, the chief economic adviser who took charge in August, later told reporters at a press conference, “There are no silver bullets here. There are lots of things that we need to do that will start us on the path of macroeconomic stabilization, which will instill confidence both in financial and real investors.”

The Indian economy is projected to slow to 5% growth in the year to 31 March, the slowest pace in a decade, burdened by regulatory hurdles for infrastructure investments, higher interest rates and global economic crisis.

The survey pointed out that with the ongoing private sector deleveraging and government fiscal consolidation in developed economies, the global economy is likely to post a “very moderate” recovery in 2013 and would only gather steam in 2014. The survey said India cannot take the external environment for granted and has to move quickly to restore domestic balance. “What is important is to recognize that a lot needs to be done, and the slowdown is a wake-up call for increasing the pace of actions and reforms,” it said.

Rajan said India is in a difficult situation, but not an impossible one. “The bigger issue is whether we have a good handle on the underlying circumstances of the economy and the necessity for the policy to rectify that.”

The survey, however, seemed to be against raising income-tax rates or the imposition of a super-rich tax. “Of course, it is much better to achieve a higher tax-GDP (gross domestic product) ratio by broadening the base that is taxed rather than increasing marginal tax rates significantly—higher and higher tax rates impinge more and more on incentives to undertake taxable activity, while encouraging tax evasion,” it held.

C. Rangarajan, chairman of the Prime Minister’s economic advisory council, had mooted a higher tax rate for the super rich to compensate for falling tax revenue collections.

India’s tax-GDP ratio, after reaching a peak of 11.9% in 2007-08, declined to 9.6% in 2009-10 and was at 9.9% in 2011-12.

“Raising the tax-GDP ratio to above the 11% level is critical for sustaining the process of fiscal consolidation in the long run,” the survey said.

Making a case for the Reserve Bank of India to lower interest rates further to enable a pick-up in investment and consumption, the survey said the central bank should link its monetary policy to the behaviour of the less-volatile non-food manufacturing inflation, or core inflation.

“To the extent that monetary policy has limited influence over certain aspects of inflation such as food prices, it may be appropriate for monetary policy to set rates based on what it can influence,” the survey said.

Advocating expenditure reforms, the survey said the fiscal deficit should be reduced by shrinking wasteful and distortion-inducing subsidies while protecting Plan expenditure, given the large unmet development needs. Chidambaram has promised to keep the fiscal deficit at 5.3% of GDP in 2012-13 and bring it down to 4.8% in the next fiscal.

Measures highlighted in the Economic Survey may resonate in the Union Budget on Thursday, said Madan Sabnavis, chief economist at Care Ratings.

“This environment has warranted the government to reduce spending to anchor inflation, facilitate corporate and infrastructure spending to ease supply and work towards fiscal consolidation. Going forward, these steps would need to be pursued with greater fervour,” he added.

The survey stressed the need for creating more productive jobs, especially in the organized manufacturing sector, to meet growing aspirations of the youth. It estimated that nearly half the additions to India’s labour force in 2011-30 will be in the 30-49 age group.

“The survey has raised some very valid concerns. Joblessness is a key issue and the government needs to focus its energies on generating employment,” said Rajesh Chakrabarti, executive director, Bharti Institute of Public Policy, and a faculty member at the Indian School of Business.

“There is a need to create jobs for our burgeoning population. The job creation numbers show that some of the government’s strategies surrounding employment generation like the skill development strategy have not worked,” he added.

 

PRIYA

PGDM 2nd Sem

Railway Budget 2013: Top Rail official downplays hike in reservation fees of superfastt

NEW DELHI: The Chairman of Railway Board today sought to downplay the hike in reservation fees and supplementary charges in superfast trains, saying these trains constitute only 30 per cent of the total passenger services in the country.

"There is no charge on the sleeper-class and unreserved class passengers who constitute 90 per cent of the total commuters except when they travel by superfast trains, which constitute 30 per cent of the total passenger trains," Railway Board Chairman Vinay Mittal said.

He said this when his attention was drawn to the hike in today's Rail Budget on reservation free and supplementary charges and what would be its impact on passengers.

At the post-Rail Budget briefing, he noted that the Railways kept the base fare untouched as "we did not want any additional burden to come on the passengers at this point of time".

Though Railways had effected an across-the-board hike on passenger fares only last month, there was speculation of a further hike in today's Rail Budget as the fuel price hike which followed, ate into the planned additional revenue.

About linking the Fuel Adjustment Component (FAC) to freight tariff, he said it was necessary to avert the loss which would have otherwise gone from Railway coffers.

"FAC is going to neutralise the additional expenditure that Railway is going to incur on the fuel cost. It is not going to be an additional earning to the kitty," he said.

Mittal though underlined that if there is a reduction in the fuel charges, "the fare component will ensure that the fare moves down and if there is an increase, we have to take a call. We have said we would be reviewing it every six months."

The hike in reservation fees and supplementary charges will add to an increase of Rs 5 to Rs 25 in fares for all classes in superfast trains.

The impact on the freight tariff as a result will be 4.5 to 4.6 per cent, he said.

Avinash kumar
PGDM 2nd sem.

Economic Survey: Government likely to hit fiscal deficit target of 5.3 percent

Budget 2013

The countdown has begun for the biggest economic event of the year and P. Chidambaram has a tough job on his hands.  Full Coverage 

• V Balakrishnan: What the IT industry wants
• Budget speeches: it's how you say it
• A look at last five budgets
• What we want to see in budget: Apurva Shah

By Manoj Kumar and Rajesh Kumar Singh

NEW DELHI | Wed Feb 27, 2013 1:10pm IST

(Reuters) - India is likely to hit its fiscal deficit target of 5.3 percent despite a significant shortfall in revenue, a government report said on Wednesday, a day before Finance Minister P. Chidambaram unveils what is expected to be the most austere budget in years.
The annual report on challenges facing the economy was prepared by Raghuram Rajan, a former chief economist to the International Monetary Fund (IMF) who became the top adviser in the finance ministry last year.
Rajan had previously said that 5.3 percent was a "tough" deficit target for fiscal 2012/13 (April-March).
The report said prioritising expenditure and raising the tax-to-GDP ratio were key to medium-term fiscal consolidation. Chidambaram has vowed to bring the deficit down to 4.8 percent in the fiscal year that begins in April.
A deficit of 5.3 percent of GDP would remain the widest spending gap among the BRICS group of major emerging nations, which also includes Brazil, Russia, China and South Africa. It makes credit expensive for the private sector and is the prime reason for threats by ratings agencies Standard & Poor's and Fitch to downgrade India's sovereign credit rating to 'junk' status.
The report also forecast the economy will grow 6.1-6.7 percent in 2013/14, well above a rate of 5.0 percent it expected this fiscal year

PRIYA.
PGDM 2nd sem

Sensex gains 79 points in early trade

MUMBAI: The BSE benchmark Sensex gained over 79 points in early trade on Wednesday on emergence of buying by funds and retailers at existing lower levels amid a firming Asian trend.
The 30-share barometer rose by 79.18 points, or 0.42 per cent, to 19,094.32. The index had lost 316.55 points in the previous session.
Similarly, the wide-based National Stock Exchange index Nifty moved up by 20.95 points, or 0.56 per cent, to 5,782.30.
Realty, metal and oil and gas sector stocks led the recovery.
Brokers said emergence of buying by funds and retailers at existing lower levels amid a firming trend in the Asian region mainly buoyed the trading sentiments.
Meanwhile, in Asia, Hong Kong's Hang Seng index rose by 0.56 per cent, while Japan's Nikkei up by 0.17 per cent in early trade. The US Dow Jones Industrial Average ended 0.84 per cent higher in Tuesday's trade.

Brokers said emergence of buying by funds and retailers at existing lower levels amid a firming trend in the Asian region mainly buoyed the trading sentiments.

PTI | Feb 27, 2013, 09.55AM IST MUMBAI: The BSE benchmark Sensex gained over 79 points in early trade on Wednesday on emergence of buying by funds

 LALIT SHARMA
PGDM 2nd SEM.

Railway Budget short on politics, long on economics

Freight rates to be linked to fuel price; funds to be raised from surplus land assets; tariff authority on cards

Railway minister P.K. Bansal says the proposal to set up an independent tariff regulatory authority will be taken up by an inter-ministerial panel. Photo: Ramesh Pathania/Mint

New Delhi: In his maiden budget, railway minister Pawan Kumar Bansal boldly undertook another round of fare revisions and also committed to the politically sensitive decision of monetizing Indian Railways’ surplus land assets by selling some to private developers and generating an estimated Rs.1,000 crore in revenue.

In the process, he chose pragmatism over political grandstanding, ignored populist claims from his own party and risked earning the wrath of his own constituency.

Bansal effected an across-the-board increase in freight rates, and also indexed future rates to the price of fuel. The minister chose not to increase passenger fares, which were raised last month, but did effect a 50% increase on an array of booking charges.

The minister also promised the setting up of a tariff regulatory authority; an inter-ministerial body is discussing the proposal and is expected to sign off on it shortly, Bansal disclosed in the post-budget press conference.

“We looked at the actual position prevailing on the ground and acted accordingly. I did not want to make high promises.

Rohit singh
PGDM 2 nd sem.