State of Indian Economy & Budget Proposals 2012

By - Akash Jauhari

Geo Political tension in

Middle East

High Crude Oil Prices

Euro Zone Crisis

Natural Calamities in

Japan & Thailand

Slow Recovery in

US

Global Factors Effecting Indian Economy

These Factors hamper the exports and Foreign Investments in India.

Interconnection between Macro-economic Factors

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

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

IIP Numbers

Disinvestment Target Missed

Increased Oil

Subsidies

Poor Revenue

Collection

Stimulus/ other

subsidies

Fiscal Deficit target of 4.6% missed

Inflation

WPI CPI

9% 7%

Key Factors responsible for continued Inflation:

High Crude Oil Prices;High Commodity, minerals and chemical prices;Depreciated Rupee;Supply Side Constraints

Exports Imports Net ImpactExports Growing:Petroleum, Engineering, Gems & Jewelry(high value added pdts)

Imports Growing:High & Volatile Crud Oil prices.

In absolute terms, trade deficit widening.

FII’s down driven by Euro zone

uncertainties

Slight improvement in FDI’s

Major Increase in external borrowings

Net Capital Inflows Increased

Balance of Payments for FY 2011-12 compared to previous year.

Capital Flows for FY 2011-12 compared to previous year.

GDP FY 2011-12 FY 2012-13 (P)

6.9 % 7.6%Widening Fiscal Deficit:Reduced Profitability of corporate due to high interest rate and high inflation has dented the revenues for the Government.Proposed Food Security bill will further burden the government expenditure.

Poor GDP figures for 2011-12

Infrastructure

• Greater participation of Private Sector.

• Govt. promoting PPP.

• Issuance of Tax free Infra bonds & Infra Debt bonds

Agriculture

• Taking Green Revolution to Eastern India.

• Kishan Credit Card Scheme.

• Increase in Storage capacity.

Manufacturing

• Target of making manufacturing as 25% of GDP

• Creating 10 crore jobs in next decade

Financial Sector

• Taking forward Legislative reforms in finance sector.

• KYC central Database to be setup.

Environmental

• Concession and exempt for machinery & equipment for Solar Thermal Plant.

• Promoting Energy Saving devices.

Other Proposals

• Rs 30,000 crore to be raised via dis-investment in 2012-13.

• National Food Security Bill in Parliamentary Standing Committee.

Policy Proposals