Union Finance Minister Arun Jaitley on 9th July tabled the pre-Budget Economic Survey for 2013-14 in the Lok Sabha.
Indian economy is likely to grow in the range of 5.4 to 5.9 per cent in 2014-15 overcoming the sub-5 per cent growth of Gross Domestic Product (GDP) witnessed over the last two years, said the survey.
The growth slowdown in the last two years was broad based, affecting in particular the industry sector. Inflation too declined during this period, but continued to be above the comfort zone, owing primarily to the elevated level of food inflation.
The Economic survey also predicts that moderation in inflation would ease the monetary policy stance and revive the confidence of investors, and with the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy can look forward to better growth prospects in 2014-15 and beyond.
Economic Survey 2013-14 states that in comparison with previous years, inflation showed signs of receding with average wholesale price index (WPI) inflation falling to a three-year low of 5.98 per cent during 2013-14, compared to 7 and 9% over the previous two years. Consumer price inflation, though higher than the WPI, has also exhibited signs of moderation with CPI (new-series) inflation declining from 10.21 per cent during FY 2013-14 to about 9.49 per cent in 2013-14. Food inflation, however, remained stubbornly high during FY 2013-14, reaching a peak of 11.95% in third quarter.
High inflation, particularly food inflation, was the result of structural as well as seasonal factors. Contribution of the commodity sub-groups, ‘fruits and vegetables’, as well as ‘egg, meat and fish’ to the food inflation has been very high.
The survey also points out at the downside risks to the economy arising from a poor monsoon, the external environment and the poor investment climate. After recovering in 2009-10 and 2010-11 from the crisis and growth slowdown of 2008-09, GDP growth slowed to below 5 per cent for two consecutive years, i.e. 2012-13 and 2013-14.
Economic Survey 2013-14: Highlights
Wholesale Price Index (WPI) Inflation shows sign of receding; fell to 5.98% during 2013-14
Consumer price inflation (CPI) declined to about 9.49 per cent in 2013-14.
Food inflation, however, remained stubbornly high during FY 2013-14, reaching a peak of 11.95% in third quarter.
Both, Wholesale and Consumer Price Inflation, expected to go downward.
The passage of the PFRDA Act, the shift of commodity futures trading, FSLRC report were the three major milestones of the year 2013-14
In the banking sector gross NPAs of banks registered a sharp increase. Overall NPAs of the banking sector increased from 2.36 per cent of total credit advanced in March 2011 to 4.40 per cent of total credit advanced in December 2013.
The RBI has indentified five sectors -- infrastructure, iron and steel, textiles, aviation and mining as the stressed sectors.
The New Pension System (NPS), now National Pension System, represents a major reform of Indian pension arrangements, and lays the foundation for a sustainable solution to ageing in India by shifting to an individual account, defined-contribution system.
Till May 7, 2014 a total of 67.11 lakh members have been enrolled under the NPS with a corpus of Rs. 51,147 crore.
The Swavalamban Scheme for workers in the unorganized sector launched in 2010, has now been extended to five years for the beneficiaries enrolled in 2010-11, 2011-12, and 2012-13 and thus the benefits of co-contribution under the Scheme would be available till 2016-17.
The FSLRC in its Report submitted on March 24, 2011 has given wide-ranging recommendations, broadly in the nature of governance enhancing principles for enhanced consumer protection, greater transparency in the functioning of financial sector regulators in terms of their reporting system, greater clarity on their interface with the regulated entities and greater transparency in the regulation making process by means of mandatory public consultations, incorporation of cost benefit analysis etc.
Fiscal deficit for 2013-14 contained at 4.5% of the GDP
Fiscal Outcome of Central Government in 2013-14 achieved
Economy Survey recommends fiscal consolidation through higher tax-GDP ratio then merely reducing the expenditure to GDP ratio
Proactive policy action helped government remain in fiscal consolidation mode in 2013-14
Total outstanding liabilities of the central and state governments decline as a proportion of GDP
Economic Survey says that despite the global and domestic challenges, the economy achieved its targeted fiscal consolidation in 2013-14 but this was done by cutting expenditure (majorly plan /capital expenditure) which is unsustainable for an economy.
Addressing the risk of food, fertilizer and petroleum subsidies is critical.
Another challenge lies in improving tax buoyancy, and overall shortfall in non-debt receipts could be contained with greater efforts at mobilisation and reforms.
Fiscal consolidation remains imperative for the economy, both in the current context and the years to come with the emphasis on maintaining the quality of adjustment.
Long-term Borrowings Account for 78.2 per cent of Total External Debt
Sustaining the improvement in the BoP position in the medium term is a challenge.
Given the uncertain global environment and the frequent bouts of flight of capital on aversion to all kinds of risks, there is need to put in place a mechanism for closely monitoring developments and assessing vulnerabilities so as to take measures to cope with the situation.
External Debt Remains within Manageable Limits
India’s external debt stock at end of March 2013 stood at US $ 404.9 billion (Rs. 2,200,410 crore), recording an increase of US$ 44.1 billion (12.2 per cent) over the previous year’s level of US $ 360.8 billion (Rs. 1,844,167 crore).
India’s foreign exchange reserves increased from US $ 292.0 billion at end March 2013 to US $ 304.2 billion at end march 2014.
India has the Second Fastest Growing Services Sector with Compound Annual Growth Rate at 9.0 Per Cent
India ranked 12th in terms of services Gross Domestic Product (GDP) in 2012.
While services share in World GDP was 65.9 per cent and in employment was only 44 per cent in 2012, in India, they were 56.9 per cent and 28.1 per cent respectively.
Services constitute a 57 per cent share in GDP at factor cost (at current prices) in 2013-14, an increase of 6 percentage points over 2000-01.
In 2013-14, FDI inflows to the services sector (top five sectors including construction) declined sharply by 37.6 per cent to US$ 6.4 billion compared to an overall growth in FDI inflows at 6.1 per cent resulting in the share of the top five services in total FDI falling to nearly one-sixth.
India’s increase in share in world services exports from 0.6 per cent in 1990 to 3.3 per cent in 2013 was faster than in merchandise exports. Exports of software services, accounting for 46 per cent of India’s total services exports, decelerated to 5.4 per cent in 2013-14, travel, accounting for a nearly 12 per cent share, witnessed negative growth of 0.4 per cent.
The annual average exchange rate of the rupee went up from Rs. 47.92 per US dollar in 2011-12 to Rs. 54.41 per US dollar in 2012-13 and further to Rs 60.50 per US dollar in 2013-14.