The document summarizes the key factors affecting the Indian economy in 2012, including global uncertainties in the US, Europe, and Middle East that hampered exports and foreign investment. It also discusses the interconnection between domestic macroeconomic factors like inflation, interest rates, investment, consumption, and government revenues/deficits. Key economic indicators like GDP growth, fiscal deficit, trade deficit, and capital flows are analyzed. The budget proposals focus on boosting infrastructure, agriculture, manufacturing and jobs, while addressing fiscal deficit through asset sales and food security expenditures.

1. State of Indian Economy & Budget Proposals 2012
By - Akash Jauhari

2. 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 & Thailand
These Factors hamper the exports and Foreign Investments in India.

3. 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 Deficits
Hence there is a conflict between the Monetary and Fiscal policies. One attempting
to reduce inflation & liquidity while other trying to push growth.

4. IIP Numbers
Component Performance Factor
Manufacturing Low to medium High interest rates, Decelerating Demand
globally
Mining Major Contraction Stringent Laws, Crackdown on Illegal Mining
Power Medium to High Domestic Demand

5. 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

6. 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 high
6.9 % 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.

7. Policy Proposals
Infrastructure Agriculture Other Proposals
• Greater participation of • Taking Green Revolution • Rs 30,000 crore to be
Private 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 Parliamentary
Infra 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 Solar
finance sector. GDP Thermal Plant.
• KYC central Database • Creating 10 crore jobs • Promoting Energy Saving
to be setup. in next decade devices.