Highlights of economic review by prime minister’s council

By IANS
Monday, February 21, 2011

NEW DELHI - Highlights of the latest review by the Prime Minister’s Economic Advisory Council headed by former Reserve Bank governor C. Rangarajan, barely a week ahead of the presentation of the federal budget:

-Economy expected to grow at 8.6 percent in 2010-11 and 9 percent next fiscal

-Agriculture expected to grow at 5.4 percent in 2010-11 and 3 percent next fiscal

-Industry expected to grow at 8.1 percent in 2010-11 and 9.2 percent next fiscal

-Services expected to grow at 9.6 percent in 2010-11 and 10.3 percent in 2011-12

-Slow recovery in global economic and financial situation

-Rising domestic savings and investment chief engines of growth

-Investment rate expected to be 37.0 percent in 2010-11 and 37.5 percent next fiscal

-Domestic savings to be over 34 percent in 2010-11 and 34.7 percent next fiscal

-Current account deficit pegged at 3.0 percent of GDP in 2010-11 and 2.8 next fiscal

-Trade deficit pegged at $132.0 billion in 2010-11 and $151.5 billion next fiscal

-Invisibles trade surplus projected at $81.3 billion in 2010-11 and $95.7 billion next fiscal

-Capital flows can be readily absorbed by needs of high growing economy

-Capital inflows projected at $64.6 billion for 2010-11 and $76.0 billion next fiscal

-Accretion to reserves pegged at $12.1 billion in 2010-11 and $20.2 billion next fiscal

-Inflation rate projected at 7 percent by March 2011

-The declining trend in food prices will result in lower food inflation

-Manufactured goods inflation has remained low

-Care has to be taken to ensure manufactured goods inflation remains below 5 percent

-Monetary policy exit stimulus and look at fiscal tightening

-Current year fiscal adjustment may not be a problem

-Fiscal deficit outcome for 2010-11 could be marginally better than budget estimates

-Consolidated fiscal deficit is likely to be 7.5-8 percent of GDP for 2010-11

-Considerable urgency in the implementation of goods and services tax

-Budgeted level of fiscal deficit and revenue deficit beyond comfort zone

-To sustain 9 percent growth, steps required are:

a) Contain inflation by policies and supply side management

b) Step up pace of infrastructure creation

c) Continue efforts to contain current account deficit

d) Pay greater attention to agriculture

Filed under: Economy

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