Indian economy after registering a robust growth of more than 9% during the period 2005-08, moderated to a growth of 6.7% in 2008-09 on the back of the global financial crisi

1. INDIAN ECONOMY
Part 1
National Conference on “Infrastructure
Finance – Building for Growth”

2. INDIAN ECONOMY
Indian economy after registering a robust growth of more than 9% during the
period 2005-08, moderated to a growth of 6.7% in 2008-09 on the back of the
global financial crisis. As a result of timely stimulus in fiscal and monetary
space, the economy managed to recover quickly to a growth of 8.4% in 2009-
10 and 2010-11. Since then, however, the fragile global economic recovery
and a number of domestic factors have led to a slowdown once again. Data
released by the central statistics office (CSO) showed the economy grew by
4.7% in 2013-14 with the GDP increasing to Rs. 57 trillion, shade below the
original estimate of 4.9% but slightly above the 4.5% growth in 2012-13.

3. Indian Economy
The growth rate of the economy, measured by the growth in GDP at constant
(2011-12) market prices, improved from 5.1% in 2012-13 to 6.9% in 2013-14
and is projected to clock 7.4% in 2014-15 according to central statistics office
(CSO).
India’s economy will grow at a rate of more than 8% in 2015-16, while
consumer inflation will drop to between 5 and 5.5%. The growth in services
sector accelerated from 8.0% in 2012-13 to 9.1% in 2013-14.

4. Indian Economy
The country’s economy expanded by 4.7% in 2013-14, the second successive
year of sub 5% growth hurt by policy delays, high inflation and the global
slowdown but the election of new government has triggered hopes of a revival
in growth and sentiment in the months ahead. Manufacturing sector continued
to remain under stress, declining 0.7% Y-o-Y in 2013-14 compared with 1.1%
growth 2012-13. Growth in 2013-14 was helped by a smart rebound in the farm
sector which grew at an annual rate of 4.7% compared with a 4.5% expansion in
the previous year earlier period. Going ahead, service sector, after achieving
double-digit growth continuously for five years and narrowly missing double
digits in the sixth (between 2005- 06 and 2010-11), the growth rate of the
services sector also declined to 8.2% in 2011-12. The segment grew 12.9% in
2013-14 compared with 10.9% in the previous financial year.

5. INDIAN ECONOMY
The reason behind, economic slowdown despite a strong recovery from the
global financial crisis is firstly, the boost to demand given by monetary and
fiscal stimulus following the crisis was large. The result was strong inflation
and a powerful monetary response that also slowed consumption demand.
Second, starting in 2011-12, corporate and infrastructure investment started
slowing both as a result of investment bottlenecks as well as the tighter
monetary policy. Thirdly, even as the economy slowed, it was hit by two
additional shocks: a slowing global economy, weighed down by the crisis in
the Euro area and uncertainties about fiscal policy in the United States, and a
weak monsoon, at least in its initial phase.

6. Indian Economy
The consequent slowdown, especially in 2012-13, has been across the board,
with no sector of the economy remaining unaffected. Falling savings without
a commensurate fall in aggregate investment have led to a widening current
account deficit (CAD). Wholesale price index (WPI) inflation has been coming
down in recent months. However, food inflation, after a brief slowdown,
continues to be higher than overall inflation. Given the higher weightage to
food in consumer price indices (CPI), CPI inflation has remained close to
double digits.

7. Indian Economy
The reason behind better performance of the economy is advantage of low
crude oil prices that has impacted favourably the current account balance &
will also moderate the price increase in general as petroleum products are
used in the production of almost every commodity & service. With the global
economy also likely to recover somewhat in 2015, these measures should
help in improving the Indian economy's outlook for 2014-15.

9. Indian Economy
The consequent slowdown, especially in 2012-13, has been across the board,
with no sector of the economy remaining unaffected. Falling savings without
a commensurate fall in aggregate investment have led to a widening current
account deficit (CAD). Wholesale price index (WPI) inflation has been coming
down in recent months. However, food inflation, after a brief slowdown,
continues to be higher than overall inflation. Given the higher weightage to
food in consumer price indices (CPI), CPI inflation has remained close to
double digits.

10. Indian Economy
Another consequence of the slowdown has been lower-than-targeted tax and
non-tax revenues. With the subsidies bill, particularly for petroleum products
increasing, the danger that fiscal targets would be breached substantially
became very real in the current year. The situation warranted urgent steps to
reduce government spending so as to contain inflation. Also required were
steps to facilitate several measures announced in recent months are aimed at
restoring the fiscal health of the government and shrinking the CAD as also
improving the growth rate.

11. INDIAN ECONOMY
With the global economy also likely to recover somewhat in 2015, these
measures should help in improving the Indian economy’s outlook for 2014-15.
However with the global prices of crude dipping to below USD 90 per barrel,
the financial position is expected to improve substantially. For the first time
in many years, the Oil Marketing Companies (OMCs) are not incurring any loss
on the sale of diesel. On the contrary, they are making profit at the current
price of crude oil which has led to a clamor for a sharp reduction in the price
of diesel.

12. INDIAN ECONOMY
India’s economic growth has been led by the services sector in the last
decade, particularly owing to the growth in Information Technology (IT) and
Business Process Outsourcing (BPO) industries. The manufacturing sector’s
importance has grown in the recent years with the advancement in its output.
The sector offers huge potential for employment creation. Moreover, the
importance of Micro, Small and Medium Enterprises (MSMEs) in the growth
process is considered to be a key engine of economic growth. The long-term
policy of the country is to achieve inclusive growth. The current
developmental problem facing India is exacerbated by the changing
demographic profile of the country. The number of unemployed will be a
large number of which the proportion of the educated youth will be the
largest. Therefore, the need for strong, accelerated economic growth is now
much more acute than ever.

13. INDIAN ECONOMY
With widespread reform measures initiated in recent months, country’s
strong fundamentals and the global economy poised for a moderate recovery
in 2014-15, the Indian economy is expected to witness an improved outlook
in the medium term. The strong domestic demand and a more conducive
investment climate are also positive for the recovery of the economy.

14. Budget Highlights
•Rs. 500 crore for “Deen Dayal Upadhyaya Gram Jyoti Yojana” for feeder
separation to augment power supply to the rural areas.
•Rs. 14,389 crore provided for Pradhan Mantri Gram Sadak Yojna (PMGSY).
•Vision of the Government is that 500 urban habitations to be provided
support for renewal of infrastructure and services in next 10 years through
PPPs.
•100 crore provided for Metro Projects in Lucknow and Ahmedabad.

15. Budget Highlights
•Rs. 11635 crore will be allocated for the development of Outer Harbor
Project in Tuticorin for phase I.
•Scheme for development of new airports in Tier I and Tier II Cities to be
launched.
•An investment of an amount of Rs. 37,880 crores in NHAI and State Roads is
proposed which includes Rs. 3000 crores for the North East.
•Target of NH construction of 8500 km to be achieved in current financial
year.
•Rs. 100 crore is allocated for a new scheme “Ultra- Modern Super Critical
Coal Based Thermal Power Technology.”

16. Budget Highlights
• Rs. 500 crores provided for Ultra Mega Solar Power Projects in Rajasthan,
Gujarat, Tamil Nadu, Andhra Pradesh and Laddakh
• Rs. 400 crores provided for a scheme for solar power driven agricultural
pump sets and water pumping stations.
• Rs. 100 crore provided for the development of 1 MW Solar Parks on the
banks of canals.

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