Growth
Rate
The Survey made it clear that this
fiscal’s five per cent growth, the slowest in the past decade, could no longer
be blamed on external factors alone, and the government will have to act on the
domestic front to come out of the slump.
The Economic Survey, while projecting an
optimistic growth rate of 6.1-6.7 percent for 2013-14, stated that to contain
the fiscal deficit the government should widen the tax base and cap subsidies,
particularly through better targeting and plugging leakages. It also claimed
the downturn was more or less over, and that the economy was looking up.
Claiming that the downturn was “more or less over” and that the economy was
looking up, the Survey projected a cautiously optimistic growth rate of 6.1-6.7
percent while conceding that the Gross Domestic Product (GDP) growth for the
current fiscal was likely to slip to the decade’s low of five per cent —
compared to the estimates by the Central Statistical Organisation (CSO) of 6.2
percent for 2011-12 and 9.3 percent the year before.
Fiscal
Deficit
The Survey had pegged the fiscal deficit
at 5.1 percent for the GDP for 2012-13, which the finance minister later
revised to 5.3 in view of the rising expenditure and subdued revenue
collection. For the new fiscal, the finance minister has committed to bring it
down to 4.8 per- cent.
The 2012-13 Survey notes that the
government needs to contain the fiscal deficit especially by shrinking wasteful
and discretionary subsidies. The Survey said: "Controlling the expenditure
on subsidies will be crucial. The domestic prices of petroleum products,
particularly diesel and LPG need to be raised in line with their prices
prevailing in the international market.
In addition, delays in getting
permissions for projects need to be curbed so that investment can pick up.
Implementation of GST, if approved, would create an integrated market and bring
more producers in the tax net. Also, the direct benefit transfer scheme
recently rolled out on the AADHAAR platform will target subsidies better.
Agriculture
Reforms
Economic Survey states that with agriculture growth
rate falling short of the four per cent target in the past five years, the
country’s annual economic report card (the first since the beginning of the
12th Five-Year Plan period), calls for increase in yields and reforms like a
suitable sustainable strategy to maximize agricultural income and make it a
viable option.
The farm sector achieved 3.6 percent
growth during the 11th Five year Plan (2007-12) – higher than growth of 2.5 and
2.4 percent during ninth and 10th Five-Year Plans but lower than expectations
of 4 percent growth target.
Therefore, in the face of stiff challenge
of feeding its growing population, the Survey has sought urgent reforms to
boost crop yield and private investment in infrastructure to motivate farmers.
Economic Survey for 2012-13 has emphasized putting in
place a strategy for farm development in the eastern and northeastern regions
amid saturation in crop yields in Green Revolution belt, especially in the
States of Punjab and Haryana.
Tax Rate
In what may bring cheer to the
well-heeled in the wake of a raging pre-Budget debate over squeezing more out
of the super-rich class, the Survey suggested the government’s efforts to raise
additional revenue should be through widening of the tax base and not by
increasing the rates. The Survey stated: “It is much better to achieve a higher
tax-GDP ratio by broadening the base which is taxed rather than increasing
marginal tax rates significantly — higher and higher tax rates impinge more and
more on incentives to undertake taxable activity, while encouraging tax evasion.”
Several experts, including PMEAC Chairman
C. Rangarajan, have pitched for higher rates of taxes on super-rich. The
Survey, prepared by a group of economist led by Chief Economic Advisor Raghuram
Rajan, said it is better to achieve fiscal consolidation partly through a
higher tax-GDP ratio than merely through reduction in expenditure as it would
only hurt development spending.
The Tax-GDP ratio touched a peak of 11.9
percent in 2007-08, but declined to 9.6 percent in 2009-10. It was 9.9 percent in 2011-12. “Raising the tax-GDP ratio to above the 11 percent level is
critical for sustaining the process of fiscal consolidation in the long run,”
it said.
Gross tax revenue in April-December 2012
has grown by 15 percent to over Rs. 6.81 lakh
crore. However, the growth in tax collection was “significantly” short of the
growth envisaged in Budget. The tax collection until December 2012, was 63.2
percent of Budget estimates, lower than the last five-year average of 69 percent.
Rate
of Inflation
Predicting that headline inflation
may fall to 6.2–6.6 percent by next month, the Survey stated that elevated food
inflation would continue to remain an area of concern as it inched towards
double digits in December 2012. While 2012, the inflation was driven by
protein items, this year it has been due to increase in prices of cereals such
as wheat, rice and maize.
Inflation which is one of the major areas of concern
for the United Progressive Alliance (UPA) Government, has remained in the range of above seven per cent since
December 2009, while to add to its woes food inflation, too, has remained on
the higher side during the same period, and according to the Economic Survey
for 2012-13, easy money policy of major developed and developing nations may
further aggravate inflationary expectations in India.
Industrial Production
With the spurt in
factory output last October turning out to be an aberration in the wake of
sharp downturns in the months after, the latest Economic Survey has sought to
describe the industrial production scenario as a ‘mixed picture’ of
sluggishness bottoming out as well as continuing for a little longer period.
What came as a
surprise to the government while India Inc. maintained a ‘we said so’ stance to
clamor for easing of interest rates, was that industrial growth, as measured by
the Index of Industrial Production (IIP), witnessed a smart recovery with a
robust 8.3 per cent expansion in October, 2012.
Despite the
downward bias, the Survey has highlighted at least two factors which point to
some optimism on the industrial front.
First is the data
on frequency distribution of products/product groups within the IIP basket
which indicates that the number of products with negative growth has declined
from 182 in the fourth quarter of 2011-12 to 160 in October-November 2012.
The second
positive factor is the Reserve Bank of India
Foreign
Direct Investment
According to the Economic Survey, Foreign Direct
Investment (FDI) in India slumped by 43.3 percent at $15.85 billion in
April-November period of the current financial year as compared to $27.93
billion in the corresponding period previous year. The overseas
investment flows in top five services declined by 9.7 percent at $8.19 billion
during the period under review.
The Survey stated
that overall FDI inflows increased by 33.6 percent in 2011-12. Overseas
investment inflows in services surged by 57.62 percent in the financial year
ended March 31, 2012.
The document
presented a day ahead of the Union Budget 2013-14 pointed out that the
government has taken many policy initiatives to liberalize FDI policy for
services sector. This includes increasing FDI limit from 49 percent to 74
percent in teleports and DTH and cable networks, permitting FDI up to 74
percent in mobile TV, up to 49 percent in scheduled and non-scheduled air
transport services and up to 50 percent in multi-brand retail trading.
The Survey stated
that the government has also amended the existing policy on FDI in single brand
product retail trading.
Health Sector
The country’s spending on health remains
abysmally low with the Survey revealing that the spending on health, as
compared to the spending on the rest of social services, has actually been
declining in the country. Raising alarm over the decline, the survey has called
for increased focus on health and education if India India
But the ground situation paints to a
sorry picture. The combined central and state expenditure on social services as
a proportion of total expenditure increased from 22.4 per cent in 2007-08 to
25.1 per cent in 2012-13 and the spending on education among all the social
services also increased over this period from 43.9 to 46.6 per cent.
However, the combined general spending (federal
and states) on health has fallen over the past five years from 21.5 per cent to
19.2 per cent.
Petroleum
Subsidies
The 2012-13
Survey has called for addressing the key issues of petroleum subsidies, clarity
on gas pricing policy, petroleum price distortion and concerns over various
disputes pertaining to the New Exploration Licensing Policy (NELP). It stated
that addressing the key fiscal risk of petroleum subsidies is critical in
better fiscal marksmanship.
It stated further
that the overall subsidy bill of the government, it said, was likely to
overshoot the target of Rs.1.79 lakh crore this financial year due to higher
crude oil prices. The government had put the petroleum products subsidy at
Rs.43,580 crore, food subsidy at Rs.75,000 crore and fertilizer subsidy at
Rs.60,974 crore, taking the total subsidy bill to Rs.1,79,554 crore for
2012-13.
Employment Rate
The 2012-13 Economic Survey stated that the employment rate between June
2011 and June 2012 went up by approximately 7 lakh led mainly by the IT and BPO
sector which accounted for almost half of the increase. It stated that upward trend in
employment since July 2009 continues despite the economic slowdown.
A sector wise analysis shows that the
textiles sector including apparels saw 1.70 lakh job additions, followed by
transport sector (0.45 lakh), metals (0.26 lakh), gems and jewelry (0.19 lakh)
and automobiles (0.11 lakh) in June 2012 over June 2011.
The survey said that employment in
handloom/power loom and leather sectors has marginally declined during this
period.
It said that there has been a sustained
and consecutive increase in employment in both the public and private sectors
covered at overall level during the last eleven quarters with a total addition
of 30.73 lakh employment during this recovery period.
According to the Survey, India
The Survey added that the annual growth
rate of employment in the private sector in 2011 was 5.6 per cent whereas that
in the public sector was negative.
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