State of Indian Economy & Budget Proposals 2012 By - Akash Jauhari
Global Factors Effecting Indian Economy Geo Political tension in Middle East Slow Recovery in High Crude Oil US Prices Natural Calamities in Euro Zone Crisis Japan & ThailandThese Factors hamper the exports and Foreign Investments in India.
Interconnection between Macro-economic Factors Demand Supply Mismatch Inflation Tight Monetary Policy/ High Interest Rates Reduced Investments & Consumptions Slowing Economy Waning Revenues for Govt. Fiscal DeficitsHence there is a conflict between the Monetary and Fiscal policies. One attempting to reduce inflation & liquidity while other trying to push growth.
IIP NumbersComponent Performance FactorManufacturing Low to medium High interest rates, Decelerating Demand globallyMining Major Contraction Stringent Laws, Crackdown on Illegal MiningPower Medium to High Domestic Demand
Fiscal Deficit target of 4.6% missed Disinvestment Increased Oil Target Missed Subsidies Stimulus/ Poor Revenue other Collection subsidies Inflation Key Factors responsible for continued Inflation:WPI CPI High Crude Oil Prices;9% 7% High Commodity, minerals and chemical prices; Depreciated Rupee; Supply Side Constraints
Exports Imports Net Impact Exports Growing: Imports Growing: In absolute terms, trade deficit Petroleum, Engineering, Gems & High & Volatile Crud Oil prices. widening. Jewelry (high value added pdts) Balance of Payments for FY 2011-12 compared to previous year. FII’s down driven by Euro Slight improvement in Major Increase in Net Capital Inflows zone uncertainties FDI’s external borrowings Increased Capital Flows for FY 2011-12 compared to previous year.GDP FY 2011-12 FY 2012-13 (P) Widening Fiscal Deficit: Reduced Profitability of corporate due to high6.9 % 7.6% interest rate and high inflation has dented the Poor GDP figures for 2011-12 revenues for the Government. Proposed Food Security bill will further burden the government expenditure.
Policy Proposals Infrastructure Agriculture Other Proposals• Greater participation of • Taking Green Revolution • Rs 30,000 crore to bePrivate Sector. to Eastern India. raised via dis-investment in 2012-13.• Govt. promoting PPP. • Kishan Credit Card Scheme. • National Food Security• Issuance of Tax free Bill in ParliamentaryInfra bonds & Infra Debt • Increase in Storage Standing Committee.bonds capacity. Financial Sector Environmental Manufacturing • Concession and exempt• Taking forward • Target of making for machinery &Legislative reforms in manufacturing as 25% of equipment for Solarfinance sector. GDP Thermal Plant.• KYC central Database • Creating 10 crore jobs • Promoting Energy Savingto be setup. in next decade devices.