Bidisha ganguly

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  • GDP growth moderated from 2.4% in 2010 to 2.0% in 2011 and further to an average of 1.8% in the first three quarters of 2012.
  • Projections for 2012-13: Fiscal deficit: 5.3%; CAD: 3.7%Shortfall in telecom auction: 21,000 croreDisinvestment receipts: Rs 30,000 croreCAD for 2012-13: $76.6 billion
  • Non-manufacturing industry includes: mining & quarrying, electricity, gas & water supply and construction
  • PSU disinvestment: MMTC, Oil India, NALCO, Hindustan Copper, NMDCWithholding tax reduced from 20% to 5%
  • Bidisha ganguly

    1. 1. The Indian Economy November 21, 2012 © Confederation of Indian Industry
    2. 2. • India: State of the Economy• India: Trends in employment• India: Policy reforms © Confederation of Indian Industry
    3. 3. Global Real GDP Growth RatesGrowth estimates have been revised down significantly 2010 2011 2012 2013 Projection ProjectionWorld 5.1 3.8 3.3 3.6Advanced Economies 3.0 1.6 1.3 1.5USA 2.4 1.8 2.2 2.1Euro Area 2.0 1.4 -0.4 0.2Japan 4.5 -0.8 2.2 1.2Emerging and Developing Economies 7.4 6.2 5.3 5.6China 10.4 9.2 7.8 8.2India 10.1 6.8 4.9 6.0Brazil 7.5 2.7 1.5 4.0 Source: IMF, World Economic Outlook, October 2012 © Confederation of Indian Industry
    4. 4. Fresh challenges in the US and Europe• Although the US recession officially ended in June 2009, the American economy has not fully recovered even after three and a half years have passed.• Indeed, it seems to be facing fresh weakness since the impact of the stimulus is fading out and fear of the “fiscal cliff” is causing uncertainty.• Euro zone economies contracted in the third-quarter 2012 despite modest gains in Germany and France, as rising unemployment and fiscal austerity across much of Europe pushed the continent into its second recession since 2009. © Confederation of Indian Industry
    5. 5. 2012q3 2.0% 2012q2 2012q1 2011q4 2011q3 2011q2 © Confederation of Indian Industry 2011q1 Quarterly GDP growth 2010q4 India 2010q3 2010q2India will be impacted 2010q1 US 2009q4 2009q3 2009q2 2009q1 2008q4 2008q3 2008q2 2008q1 15.0 10.0 5.0 0.0 -10.0 -5.0
    6. 6. Exports are sliding Exports Growth (%) 40.5% 30.8% 29.0% 23.4% 22.6% 21.3% 13.6% -3.5% -6.8% 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 H1 • Exports now constitute almost 25% of GDP and will be a drag on overall growth • The biggest declines in exports have been to Europe (-12%), ASEAN (-21%) and NE Asia (-15%) during the first half of 2012-13; surprisingly, exports to the US have increased by 14%. © Confederation of Indian IndustrySource: CSO
    7. 7. Capital Inflows have been Volatile FDI and Portfolio Inflows (US $ Billion) • While FDI inflows have been steady, portfolio inflows have 41.7 34.7 33.1 32.4 30.3 33.0 been more volatile, impacted by22.7 27.4 27.8 the uncertainty of the global 17.2 16.1 economic environment and 6.9 6.4 tough austerity measures in many economies.2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Apr-Sep 2012 -14.0 Inward FDI Portfolio Exchange Rate: INR/USD 54.00 52.00• Rupee had been gaining some 50.00 48.00 strength against the dollar but has 46.00 begun to depreciate once again. 44.00 Rupee which was trading at Rs. 42.00 57/US$ and above in June 2012 is 40.00 Mar-11 Mar-12 Nov-10 Jan-11 Sep-11 Nov-11 Jan-12 Sep-12 Jul-11 Jul-12 May-11 May-12 trading in a range of 54-55/ US$ in November 2012. © Confederation of Indian Industry
    8. 8. Domestic challenges, 1 Twin deficits • The target for the fiscal deficit for7.0 2012-13 has been revised up to 5.3%6.0 of GDP, in view of increased spending5.0 5.3% on subsidies and lower tax collections4.0 • However, even this revised target is3.0 unlikely to be met in view of the 3.7%2.0 shortfall in telecom auction receipts1.0 and in disinvestment receipts0.0 • A shortfall of Rs 50,000 crore would 2012-13 BE 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 take the fiscal deficit to 5.6% of GDP • The current account deficit is expected to moderate to 3.7% of GDP on account of lower imports. Fiscal deficit (% GDP) • However, even this will be difficult to finance Current account deficit (% GDP) © Confederation of Indian Industry
    9. 9. Domestic challenges, 2 Persistently high inflation 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Overall Core Food• Although lower than last year, inflation remains high at 7.5%• Core inflation (non-food manufacturing) has declined but food inflation has again increased• Inflation due to fuels and minerals remain in double digits and are a key reason for higher inflationary expectation © Confederation of Indian Industry
    10. 10. • India: State of the Economy• India: Trends in employment• India: Policy Reforms © Confederation of Indian Industry
    11. 11. Share of sectors in GDP and employment 2004-05 2009-10 57.2 56.6 53.1 52.9 27.9 28.1 24.7 24.4 22.7 19.0 18.7 14.7 Agriculture Industry Services Agriculture Industry Services GDP EmploymentSource: NSSO, 66th Round survey & CII computations © Confederation of Indian Industry
    12. 12. Workforce profile (2009-10) Total Population - 1180 Million 40.0% Total Labour Force - 469 Million 98.0% 7.0% Total Work Force - 459 Million 93% Organized Sector Un-Organized Sector 32 Million 427 Million 55.7% 44.3%Public Sector Private Sector 17.9 Million 14.2 Million © Confederation of Indian Industry
    13. 13. Non-agricultural workers (2009-10) in millions 80 76 70 60 60 50 47 40 30 20 10 0 Casual Regular Self-EmployedSource: NSSO, 66th Round survey & CII computations © Confederation of Indian Industry
    14. 14. Employment creation in the last decade Increase in employment (in million)• Employment created in the first half of the decade was much higher than in 1999-00 2004-05 1999-00 the second half to to to• In the second half, only non- 2004-05 2009-10 2009-10 manufacturing industrial sectors – Agriculture 21.3 -15.7 5.5 mining, utilities and construction – created jobs; in all other sectors, there Manufac- 11.7 -7.2 4.5 was a decline turing• However, this was also accompanied by a decline in the labour force, so Non-manu- 9.1 26.1 35.5 facturing unemployment did not increase. industry• This decline in the labour force was Services 18.6 -0.5 18.1 largely concentrated in the below 25 age group and among women and is therefore being interpreted as a Total 60.7 2.7 63.4 positive sign Source: Planning Commission © Confederation of Indian Industry
    15. 15. • India: State of the economy• India: Trends in employment• India: Policy Reforms © Confederation of Indian Industry
    16. 16. Recent Policy Reforms List of policy decisions taken recently Reform Date Impact announced Fuel price hike 13/09/ 2012 Reduction in fuel subsidy FDI in multi-brand retail 14/09/ 2012 Greater competition and efficiency in FDI in single-brand retail 14/09/ 2012 the retail sector; more investments FDI in broadcasting 14/09/ 2012 74% permitted in teleports, mobile TV services and sky broadcasting services FDI in civil aviation 14/09/ 2012 49% permitted in scheduled and non- scheduled air transport services FDI in power trading 14/09/ 2012 49% permitted exchanges PSU disinvestment 14/09/ 2012 More revenue for exchequer Reduction in withholding 21/09/ 2012 Cheaper foreign loans tax on foreign borrowing Financial restructuring of 24/09/ 2012 State governments to take over 50% of State Discoms liabilities Infrastructure debt fund 04/10/ 2012 Model Tripartite Agreement approved (IDF) that will facilitate creation of IDFs © Confederation of Indian Industry
    17. 17. Some promising ideasElectronic Cash Transfer – The Prime Minister announced the architecture of moving to Electronic Cash Transfers so that benefits can be transferred directly to the bank account of the targeted segment. This would significantly reduce wastages and eliminate corruption but is dependent on the rollout of Aadhar for identification of beneficiaries. With this process being directed by the PM, we can hope for rapid progress.National Investment Board – The Finance Minister has proposed the setting up of a National Investment Board (NIB) that will have the final authority in taking decisions with regard to the implementation of projects above Rs 1,000 crore. Such an authority is the need of the hour and would go a long way in expediting project implementation, which is currently inordinately delayed on account of inter-ministerial differences. © Confederation of Indian Industry
    18. 18. Key Bills pending in ParliamentInsurance Bill Introduced in Dec-2008 Allows FDI upto 49%Pension Bill Introduced in Mar-2011 Seeks to give statutory status to the PFRDACompanies Bill Re-introduced in Dec- Ensures more transparent corporate governance 2011Forward Contracts Introduced in Dec-2010 Gives statutory powers to FMC, allows trading inRegulation Act (FCRA) derivatives and optionsLand Acquisition Bill Introduced in Sep-2011 For commercial land acquisition, and rehabilitationNational Food Security Introduced in Dec-2011 Provides for food and nutritional security byBill providing specific entitlements to certain groupsPublic Procurement Bill Introduced in May-2012 Seeks to regulate and ensure transparency in the procurement processMines and Minerals Introduced in Dec-2011 Consolidates and amends the law relating to the(Development and scientific development and regulation of minesRegulation) Bill and mineralsGoods and Services Tax Introduced in Mar-2011 Landmark Change – requires constitutional(GST) Bill amendment with 2/3rd majorityDirect Taxes Code (DTC) Introduced in Aug-2010 The Bill replaces the Income Tax Act 1961 and the Wealth Tax Act, 1957Banking Laws Introduced in Mar-2011 Seeks to strengthen the regulatory powers of the(Amendment) Bill RBI © Confederation of Indian Industry
    19. 19. www.cii.in© Confederation of Indian Industry

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