Zee Media Bureau
New Delhi: India's economy is expected to grow between 5.4 percent and 5.9 percent in the current fiscal year, the new government`s first Economic Survey said on Wednesday.
The Economic Survey 2013-14, tabled in Parliament a day ahead of the Union Budget 2014-15, expects that moderation in inflation will ease the monetary policy stance and revive the confidence of investors.
As regards the downside risks, the Survey lists factors like poor monsoon, the external environment and the poor investment climate.
The Survey further said the measures taken by the government to improve investment climate and improve governance could push up growth to 7-8 percent in the coming years.
After recovering in 2009-10 and 2010-11, GDP growth slowed down to decade's low of 4.5 percent in 2012-13. It picked up marginally to 4.7 percent in 2013-14.
Here are the key highlights
Growth
-Estimates India FY15 GDP growth at 5.4-5.9%
-FY15 GDP growth likely to be on lower side of projection
-Expect industrial recovery seen in April to continue
-Downside risk to economy due to geopolitical tensions
-Economy can look forward to better growth prospects in FY15
-Need to build conducive environment for investment
-Need to revive business sentiment to boost private investment
-Need low and stable inflation regime for long-term growth
-Stable govt, optimism may translate into investment, growth
-Must ensure low inflation via fiscal consolidation
-Growth can revive to 7-8% only after FY16
-Better long-term growth prospects to help revive investment
-India services sector CAGR 9% 2001-12
-Agricultural, allied sector registered 4.7% growth in FY14
-India GDP growth below 5% for two consecutive years
-Downside risk to economy from poor monsoon, oil prices
-Improved twin deficit may lead to higher but gradual growth
-Economy going through challenging times
-Economic growth has slowed down on domestic, external factors
Inflation
-Inflation limits scope for RBI to cut rates
-Moderation in inflation to help ease monetary space
-Inflation has eased, but still above comfort level
-CPI inflation has shown signs of moderation
-FY14 CPI inflation about 9.49%
-FY14 WPI inflation at 5.98%
-Expect WPI and CPI to go downwards
-Inflation shocks of past unlikely to recur in future
-Inflation expected to moderate this fiscal
-Risk of inflation view from sub-normal monsoon in 2014-15
-FX volatility, high crude price pose risk to inflation view
-India WPI inflation expected to moderate by end of 2014
-IMF flat commodity price view augurs well for India WPI
-IMF expects global commodity prices to remain benign
-Benign commodity prices to help moderate WPI inflation
-Major risk to inflation from monsoon, oil prices
-Rise in MSP could have an impact on food inflation
-High food inflation on structural, seasonal factors
-Inflation continues to pose significant challenges
Fiscal health, Policy
-Need new FRBM Act "with teeth"
-Subsidy reforms essential to fiscal consolidation
-Raising tax-GDP ratio essential to fiscal consolidation
-Need to cut CAD to sustainable level that is easy to fund
-India has sizeable FX reserves
-Recent stability in rupee shows confidence in FX market
-Need to incentivitise domestic savings to cut gold demand
-Fiscal consolidation in FY14 achieved through spending cuts
-Better to cut fiscal gap via tax mop up than expenditure cut
-India needs sharp fiscal correction
-Modified FRBM Act needs to factor in business cycle
-Need fresh thinking on fiscal policy framework
-Fiscal consolidation, supply side management to aid monetary policy
-FY15 CAD may be limited to around $45 billion, 2.1% of GDP
-Improving tax buoyancy a challenge
-FY14 fiscal deficit contained at 4.5 percent of GDP
-India had a large trade deficit in the first quarter
-Long-term debt accounts 78.2 percent of total external debt December 31
-Sustaining improvement in BoP a challenge in medium term
-Fiscal consolidation remains imperative for economy
-BoP position improved 'dramatically' in FY14
-Better to meet fiscal consolidation partly through higher tax
Monetary Policy
-Monetary policy essential for long-run inflation control
-Need formal monetary policy framework for targeting CPI
-There are concerns about balance sheet quality of banks
-Banks' poor asset quality a major concern FY14
-External debt maturity profile shows more long-term borrow
-Financial markets continue to suffer from illiquidity
-Government steps may create space for monetary easing later FY15
-RBI followed caliberated move balancing growth, inflation
-Growth in banks' NPAs a cause of concern
-Steps being taken to improve banks' asset quality
-Need to develop bond, currency derivatives to equity level
-Money market rates softened April reflecting easing liquidity
-Poor monsoons FY15 likely risk to RBI accommodative stance
-See RBI taking more accommodative stance as inflation eases
-Expect room for monetary easing later this fiscal
-Fiscal consolidation, supply side steps to aid monetary management
-RBI stand intended to set economy on disinflationary path
Reforms, Subsidy
-Need to review nutrient-based fertiliser subsidy
-Need common market for agricultural commodities
-Need to expand decentralized procurements for PDS
-Capital controls not supporting globalisation of economy
-Reducing regulatory approval delay needs urgent attention
-Should consider direct transfer of fertiliser subsidy
-Fertiliser, food subsidy rationalisation essential
-Need tax, expenditure, regulatory reforms for growth
-Need to prepare comprehensive reform plan for all subsidies
-Addressing subsidies must to achieve quality fiscal control
-Rollout of nutrient fertiliser subsidy flawed without urea
-Tax system must move away from sops for individual industry
-Pricing of subsidised fertiliser skewed nutrient usage
-Tax regime must be simple, predictable and stable
-Replacing all indirect taxes by GST to create national market
-Tax reform can improve ease of doing business, productivity
-Need to prepare comprehensive reform plan on subsidies
-GST significant for states' resources raising potential
-Uphill task for government t take steps to augment resources
-DTC required as clean modern replacement for existing laws
-GST to be a major milestone for indirect tax reform
-Addressing key subsidies vital for better fiscal marksmanship
-GST introduction to help states' resource raising potential
-Need to re-examine laws that allow government to interfere in market
Industry
-See improvement in manufacturing, BoP in FY15
-Can revive industrial growth by removing infra bottlenecks
-Can revive industrial growth by pushing critical reforms
-Next wave of infra funding needs a capable bond market
-Need to restructure Coal India swiftly to up output
-Need to permit commercial coal mining by private companies
-Need stable trade policy for improving farm output
-Need critical feeder routes for coal to up output
-Need to optimise procurement cost of power
-Need to strengthen power companies standard, rationalise tariff
-Need to step up infra investment, improve infra spend quality
-Macro economic environment, industry seen reviving in 2 years
-FY15 to augur well for services as business activity expands
-Immediate challenge to revive service sector growth
-Prospects for IT exports bright
-Need to address long-term issues to boost investment climate
External Sector
-Sustaining BoP a challenge as some curbs need to be lifted
-Need to adjust to US tapering, accommodative policy exit
-Sustaining improved BoP to be a challenge in medium-term
-Downside risk to India's export from external stocks
-World trade, India exports still fragile
-Pick up in India April-May exports partly on low base
-Need to adjust both to FED tapering, end to accommodation
-Need mechanism to cope with capital flight, global environment
-See global recovery improving in FY15
Agriculture
-No cause of alarm on El Nino as grain stock adequate
-Need to examine inclusion of farm-related taxes in GST
-Need to reform APMC, land tenacy laws
-FCI suffering from diseconomies of scale
-Must remove curbs on farmers to buy, sell, store produce
-Need large scale private investment in food processing
-India commodity market not enabled to be a price setter
-Commodity futures help price discovery, risk management
-To curb inflation, make farmers part of national market
-Commodity futures help government take pre-emptive action
-Arbitrary cane price fixation by states hitting sugar mills
-Need to create crop seed bank
-Reforming food market a huge challenge
-Central GST could be first step towards full GST
Miscellaneous
-Land acquisition, rehabilitation needs urgent attention
-Allowing FDI in defence has large-scale investment scope
-Need to look into separating telecom networking from services
-Must focus on fuller pass-through of global oil prices
-Signs of revival in aviation sector
