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Painting an optimistic forecast for the economy in the medium to long run, the Economic Survey for 2009-10 has said the country has bounced back from the global economic slowdown and is on its way to returning to the robust growth path of around 9 per cent seen before the global crisis slowed it down in 2008.
For 2010-11, the Survey has said that India's GDP is expected to grow around 8.5 per cent, with a full recovery breaching the 9 per cent mark in 2011-12.
From 2003-04 to 2007-08, the Indian economy reported over 9 per cent annual growth.
On a bullish note, the Survey has said that it is entirely possible for India to move into the “rarefied domain” of double-digit growth and even attempt to don the mantle of the fastest growing economy in the world within the next four years. This is, however, contingent on improvements in infrastructure, both urban and rural, besides reforms in governance and administration.
The Survey, tabled in the Lok Sabha on Thursday by the Finance Minister, Mr Pranab Mukherjee, also makes a case for a resumption of the process of fiscal stimulus withdrawal in a gradual manner.
This could be a pointer that the Union Budget, to be presented on Friday, could well see a hike in excise duty and service tax rates.
Fiscal adjustment
The Survey has, however, not thrown much light on the nature of fiscal adjustment that should be pursued — whether the emphasis of fiscal consolidation should be on the expenditure side or on the revenue front, with the latter linked to the expected growth recovery.
On the revenue front, based on the trends available for April-December 2009, the Survey has highlighted that there is likely to be a shortfall in revenue receipts on account of the large decline in indirect taxes such as customs and excise and the likely lower-than-budgeted non-tax revenues. With some expenditure restraint as a proportion of the GDP, it might be possible to contain the fiscal deficit at budgeted levels, the Survey has said.
The optimism on the economic growth front comes from the revival in investment and private consumption demand, the impressive growth in exports in November and December 2009 and a remarkable turnaround in the core infrastructure sector. After a setback, agriculture is gradually getting back to the projected path, says the Survey.
Core sector
The Economic Survey also mentions that core industries such as power, coal and other infrastructure such as ports and roads are also reviving. The available evidence points to a steady revival in the flow of investible resources. The Survey has emphasised the need to develop infrastructure to complement and sustain the economic growth momentum.
Inflation concern
The Survey has also expressed concern over the emergence of high double-digit food inflation, especially in the second-half. While there is unease over rising inflation in the economy, the Survey also cautioned that sustaining current levels of domestic petroleum prices in the scenario of rising international crude oil prices may not be viable for long from the fiscal side. At the same time, an increase in domestic petroleum prices would have its impact on inflation levels, the Survey added.
Business Line
February 25, 2010
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