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The Survey calls for staying on the path of indicated fiscal consolidation.
This, it says, is critical to sustaining the desirable macroeconomic outcomes not
only in terms of higher growth in real GDP and lower inflation, but also in easing
the financing of the widening current account deficit (CAD),for which India’s sovereign
credit rating is important
Highlights of India Economic Survey 2012-13
-Economic growth pegged at 6.1-6.7
percent in 2013-14
-March 2013 inflation
estimated at 6.2-6.6 per cent
-Priority will be to rein in
-FDI in retail to pave the
way for investment in new technology and marketing of agriculture produce
-Survey calls for widening of
tax base and prioritising expenditure to bridge fiscal deficit
-Calls for curbing gold imports
to contain current account deficit
-Aadhaar-based direct cash
transfer scheme can help plug leakagesin
-With subsidies bill
increasing, danger of missing fiscal targets is real
-Survey pitches for hike in
prices of diesel and LPG to cut subsidy burden.
-Foreign Exchange reserves
remains steady at $295.6 billion at December, 2012-end
-At present, overall energy
deficit is about 8.6 percent and peak short of power is about 9
-Prospects for world trade as
well as of India are still
-Pitches for further opening
of sectors for FDI
Generally seen as
anticipating the union budget, the economic survey for 2012-13 tabled in
parliament on February 27 on the eve of the central budget 2013-14, expectedly pitched
for further reforms, cut in subsidies, definitive action on eliminating
barriers to investment and employment generation.
Not surprisingly, the
budget proposals the following day largely reflected the
mood seen in the survey.
Against the backdrop of a
steady decline in growth rate over the years, the survey has however gone
optimistic to forecast a GDP growth of 6.1 to 6.7 percent for fiscal 2013-14. It is also hopeful of controlling inflation,
projecting a decline to stay between 6.2 and 6.6 percent.
The survey clearly sought
to inject hope amid a bleak scenario that saw a plunge in growth to around 5
percent and 6.2 percent in the previous two
fiscals (2012- 13, 2011-12) from 9.3
percent and 8.6 percent in the two fiscals before that (2010-11, 2009-10), triggered in the main by the
global slowdown since September 2008.
“The slowdown is a
wake-up call for increasing the pace of actions and reforms,” the survey declared, giving, however, credit to the economic managers
for being able to steer to reasonable safety from rough waters. Attributing this
feat to “good policies and strong reforms programme”, the survey expressed
optimism that the economy will return stronger.
The survey also pushed
for fast action on the ground after the opening up of the retail trade to
foreign direct investment and said this will not just pave the way for flow of
investment in new technology, but also for marketing of farm produce in India. “Fast
agricultural growth remains vital for jobs, incomes and food security.”
Introducing a special
chapter on employment, the survey says the future holds promise for India if it
seizes the demographic dividend, with nearly half of the additions to the
labour force till 2030 expected in the 30-49 age group. “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,” says the survey,
adding new jobs are currently being added mainly in informal and low
The Survey emphasises
that efforts will have to be made to contain subsidies through better targeting
and for reducing leakages involved in their delivery. One such initiative is direct benefit transfer (DBT) scheme. Government has been
calibrating pricing policies to addressing the issue of burgeoning fertiliser
subsidy and underlined the need for according priority to food subsidy in view
of the under consumption of basic food by the poor and the extant of malnutrition.
Another consequence of slowdown
has been lower than targeted tax and non-tax revenues. With the subsidies bill,
particularly that of petroleum products, increasing, and the danger that fiscal targets would be breached substantially
became very real in the current year, the Survey said. “The situation warranted
urgent steps to reduce government spending so as to
contain inflation.” Also required were steps to facilitate
corporate and infrastructure investment so as to ease supply.
The survey expresses
concern over the high current account deficitdue to a higher share of imports vis a vis exports and says this
in the short run must be corrected by cutting oil and gold imports with market-determined
This, the survey argues,
is all the more necessary, since the flow of invisibles -such as money in the form of remittances by
Indians abroad and software earnings – are not particularly sufficient to cut current account deficit, now at 4 percent
of the GDP.
On the controversial
issue of land acquisition, the survey seeks a balance between the need for economic
growth and the costs imposed on the displaced with proper mapping of land,
easier means to facilitate leasing and transparent compensation policy.
On foreign direct
investment, the survey notes that India, with a rank of four in the global
restrictiveness index, fares better than China, ranked first. Yet, there is scope to reverse the moderation seen last year
in inflows of overseas capital. Accordingly, it calls for
a review in increasing the foreign investment cap in a host of areas,
notably public sector banks, insurance and defence production as they promise new
technology and practices and such capital are better than portfolio investment.
With agriculture growth
rate falling short of the 4 percent target in
last five years, the sector needs urgent reforms to boost crop yields and private investment in infrastructure
so as to motivate farmers and feed the growing population, the survey said. The
farm sector achieved 3.6 percent growth during the 11th Five year Plan
(2007-12), falling short of the 4 percent growth target, although it was much
higher than growth of 2.5 and 2.4 percent during 9th and 10th Plans, it added.
The agriculture sector is
broadly a story of success in the past few years. “Yet, India is at a
juncture where further reforms are urgently required to achieve greater efficiency and productivity in agriculture for sustaining growth.”
The survey points out
that the priority for the Government will be to
fight high inflation by reducing the fiscal impetus to demand as well as by focusing on incentivising food production through measures
other than price supports. But unlike the previous year, when food
inflation was mainly driven by higher protein food
prices, this year the pressure has been coming mainly from cereals.
On the Balance of
Payments and External Position, the survey highlights that with net exports declining,
India’s balance of payments has come under pressure. Moreover, in the current
fiscal, foreign exchange reserves have fluctuated between US$
286 billion and US$ 295.6 billion, while the rupee remained volatile in the range of Rs 53.02 to
Rs 54.78 per US dollar during October 2012 to January 2013.
Focus on Jobs, Development
The survey has a special
chapter focusing on jobs. The future holds promise for India provided we can seize
the “demographic dividend” as nearly half the additions to the Indian
labour force over the period 2011-30 will be in the age group 30-49. India is
creating jobs in industry but mainly in low productivity construction and not
enough formal jobs in manufacturing, which typically are higher productivity. The
high productivity service sector is also not creating enough jobs. As the
number of people looking for jobs rises, both because of the population
dividend and because share of agriculture shrinks, these vulnerabilities will
India with its focus on inclusive
development and timely interventions has been able to ward off the ills of
global economic and financial crisis better than many other countries. The
global recession and the slow down have squeezed the fiscal
space for most countries. However, India’s social sector
spending has seen a continuous increase. According to Survey, the country
continues to work on XIIth Plan initiative for “Faster, More Inclusive and
More Sustainable Growth” and strives for targeted policy for the poor with
minimal leakages. To achieve greater inclusive development, the share of
Central Govt. Expenditure (Plan and Non-Plan) on Social Service and Rural
Development increased from 14.8 percent in 2007-08 to 17.4 percent in
2012- 13(BE) 2007-08 to 25.1 percent in 2012-13.
UIAI, Bharat Nirman, Growth Indicators
Survey says that under
Phase 2 of Unique Identification Authority of India (UIAI), 40 crore residents are
to be enrolled before end 2014. As of December 2012, 25 crores Aadhaars had
been generated and approximately 20.00 crore aadhaars letters has been
dispatched. Pilots on Direct benefit transfers
(DBT) have also been successfully
conducted in the States of Jharkhand, Tripura and Maharashra to transfer
monetary benefits related to social welfare schemes. Survey says that about 10.5
crore children benefitted under the mid-day meals
programme during 2011-12.
According to Survey,
through Bharat Nirman Programme, the country strives to achieve a higher
degree of rural- urban integration and an even pattern of growth and opportunities
for the poor and disadvantaged. During 2012-13 as against physical target of 30.10
lakhs houses, 25.35 lakhs houses were sanctioned and 13.88 lakhs had been
constructed as on 31st December, 2012. The Unit assistance provided under the
Indira Awas Yojana (IAY) is being revised w.e.f 1st April, 2013 from Rs.45,000
to Rs.70,000/ in plain areas and from Rs.48,500/ to Rs.75,000/ in hilly/ difficult
areas/ integrated action plan districts. 82 left wing
extremists affected districts have been made eligible for this higher rate of
unit assistance. Under the Pradhan Mantri Gram Sarak Yojna (PMGSY), a
sum of Rs.l02658 crore to have been released to the States and about Rs. 96939
crore spent by December, 2012. A total of 3,63,652 Km. road length connecting
nearly 90,000 habitations has been completed. About 74 percent of rural
habitations are fully covered under the provision of the safe drinking water.
The Survey finds that
while some states have performed well in terms of growth indicators, they have
performed poorly in terms of poverty, rural-urban disparity, unemployment,
education, health and financial inclusion.
According to Survey, Bihar has the highest decadal
(2001-11) growth rate of population(25 percent ) while Kerala has the lowest
rate (4.9 percent ). In 2011, Kerala has the highest sex ratio (1084), while Haryana
is at the bottom (877). In terms of growth Bihar is the best performer (16.7
percent), Rajasthan is the worst (5.4 percent). Highest Poverty Head Count
Ratio (HCR) exists in Bihar (53.5) while lowest is in Himachal Pradesh (9.5 percent).
The unemployment rate is the lowest in Gujarat (18) and highest in Kerala and
Bihar (73) in Urban areas and the lowest in Rajasthan (4) and again highest in Kerala
(75) in rural areas. Kerala is the best performer in terms of life expectancy
at birth whereas Assam is the worst performer in both males and females. Based
on above findings, the Surveys calls for a rethink on the criteria used for devolution of funds to
Highest rise in Share of Services
A comparison of the
services performance of the top 15 countries for the 11 year period from 2001 to
2011 shows that the increase in share of services in GDP is the highest for
India with 8.1 percentage points. These 15 top countries include major
developed countries along with Brazil, Russia, India and China. While China’s highest
services compound annual growth rate (CAGR) stood at 11.1 percent,
India’s very high CAGR of 9.2 percent was second highest and also accompanied
by highest change in its share. This is a reflection of the fact
that India’s growth has been powered mainly by the services
Benefits of Market Diversification
There has been
significant market diversification in India’s trade. Region wise, India’s exports to Europe and America have declined
to 18.7 percent and 19.5 percent respectively in 2012-13 from 25.9 percent and
24.7 percent in 2000-01. On the other hand export to Asia and Africa rose to
50.4 percent and 9.6 percent respectively from 37.4 percent and 5.3 percent
respectively during the same period. There was a noticeable rise in the share
of West Asia–GCC (Gulf Cooperation Council) countries from 14.9 percent in
2011-12 to 17.7 percent in 2012-13 (April- November) said the Survey. However,
the Survey noted that “in terms of product diversification a lot more needs to be done.”
More than 3.7 Lakh Villages Electrified
The Survey notes that
more than 3.79 lakh villages across the country have been provided electricity
through the Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY). The rural electrification scheme launched in April, 2005 has provided electricity to 1,06,116 unelectrified villages and intensive electrification in 2,73,328 partially electrified villages.
It has also provided free electricity connections to 202.6 lakh below poverty
line (BPL) households as on 30th November, 2012. In addition, capital subsidy of
Rs. 26,664 crore has been utilised under the scheme so far.
Fiscal Outcome Indicates Improvement in 2012-13
The Survey emphasises
that the fiscal outcome of Central Government in 2012-13 so far indicates a significant improvement over 2011-12. The fiscal position
of the States has continued to progress with fiscal deficit budgeted at 2.1 percent of gross domestic product (GDP).
The fiscal outcome of
2011-12 was affected by macro economic developments of
slowdown in growth, higher global crude oil prices
and sluggish financial market conditions for effecting
the budgeted disinvestments programme.
The Survey calls for staying
on the path of indicated fiscal consolidation. This, it says, is critical to
sustaining the desirable macro-economic outcomes not only in terms of higher
growth in real GDP and lower inflation, but also in
easing the financing of the widening current account deficit (CAD), for which India’s sovereign credit rating is important.
In sum, the survey has
displayed cautious optimism about India’s overall growth, stressing that any growth
is meaningless if it is not inclusive. Hence it lays emphasis on social spending to benefit the poor and socially disadvantaged sections, while advocating restraint on general consumption by the more
fortunate. It’s a good recipe for inclusive growth and its success, no doubt,
depends on honest implementation.
R C Rajamani The author is Editorial
Consultant, The Statesman, New Delhi.