Highlights of India’s economic review

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New Delhi: Highlights of the latest review by the Prime Minister’s Economic Advisory Council headed by former Reserve Bank Governor C. Rangarajan, barely a week ahead of the presentation of the federal budget:

l Economy expected to grow at 8.6 percent in 2010-11 and 9 percent next fiscal.

l Agriculture expected to grow at 5.4 percent in 2010-11 and 3 percent next fiscal.

lIndustry expected to grow at 8.1 percent in 2010-11 and 9.2 percent next fiscal.

l Services expected to grow at 9.6 percent in 2010-11 and 10.3 percent in 2011-12.

l Slow recovery in global economic and financial situation.

l Rising domestic savings and investment chief engines of growth.

l Investment rate expected to be 37.0 percent in 2010-11 and 37.5 percent next fiscal.

l Domestic savings to be over 34 percent in 2010-11 and 34.7 percent next fiscal.

l Current account deficit pegged at 3.0 percent of GDP in 2010-11 and 2.8 next fiscal.

l Trade deficit pegged at $132.0 billion in 2010-11 and $151.5 billion next fiscal.

l Invisibles trade surplus projected at $81.3 billion in 2010-11 and $95.7 billion next fiscal.

l Capital flows can be readily absorbed by needs of high growing economy.

l Capital inflows projected at $64.6 billion for 2010-11 and $76.0 billion next fiscal.

l Accretion to reserves peg-ged at $12.1 billion in 2010-11 and $20.2 billion next fiscal.

l Inflation rate projected at 7 percent by March 2011.

l The declining trend in food prices will result in lower food inflation.

l Manufactured goods inflation has remained low.

l Care has to be taken to ensure manufactured goods inflation remains below 5    percent.

l Monetary policy exit stimulus and look at fiscal tightening.

l Current year fiscal adjustment may not be a problem.

l Fiscal deficit outcome for 2010-11 could be marginally better than budget estimates.

l Consolidated fiscal deficit is likely to be 7.5-8 percent of GDP for 2010-11.

l Considerable urgency in the implementation of goods and services tax.

l Budgeted level of fiscal de-ficit and revenue deficit beyond comfort zone.

l To sustain 9 percent growth, steps required are:

(a) Contain inflation by policies and supply side management.

(b) Step up pace of infrastructure creation.

(c) Continue efforts to contain current account deficit. (d) Pay greater attention to agriculture.

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