Press Release on Economic Outlook for 2009-10 :- Highlights
Oct 22, 2009 Finance
The Indian economy weathered the financial turbulence well
- 6.7 % growth in 2008/09 – amongst the highest growth rates in the world.
- well calibrated adjustments in the monetary and fiscal policies
Projected growth 6.5 % in 2009/10 against 6.7 % in 2008/09
- Agriculture : -2.0 % (1.6% in 2008/09)
- Industry (including construction) : 8.2% (3.9% in 2008/09)
- Services: 8.2 % each. (9.7% in 2008/09)
Unlikely that growth will be lower than 6.25 % but may reach 6.75 %.
Impact of international conditions
- Recession, higher household savings and demand contraction in developed economies- adverse for exports growth.
- Encouraging signs of revival of capital flows.
- A further negative shock to the global financial system and global inflation could threaten growth in Indian economy.
Investment rate unchanged from 2008/09
- Projected investment rate in 2009/10: 36.5%. Will pick up with improvement in domestic conditions.
- Projected savings rate 34.5% in 2009/10 (33.9% in 2008/09)
22.7 % deficiency in the SW monsoon will lower agricultural output
- Large acreage losses under kharif foodgrain, mainly rice. Rabi prospects good
- Projected food grain production:223 million tonnes in 2009/10 (234 mt in 2008/09)
Current Account Deficit : - 2.0 % of GDP in 2009/10 ( – 2.6 % in 2008/09)
- Exports projected at $188.9 billion in 2009/10
- Imports projected at $306 billion in 2009/10
- Projected merchandise trade deficit for 2009/10:$ 117 billion or 9.4 % of GDP.
- Projected net invisibles: $92.2 billion. Service exports & remittances have revived.
Capital inflows of $57.3 billion in 2009/10 ($9.1 billion in 2008/09)
- Net accretion to reserves : $31.6 billion ( – $20.1 billion in 2008/09)
Surge in food inflation
- 13% annualized increase in overall WPI index and 33% for primary food index in first half of 2009/10. Sharper rise in CPI indices.
- Global inflationary pressures will be high – oil and commodity prices rising
- Inflation in March 2010 expected around 6%
Improvement in financial conditions – global and domestic
- Recovery in international loan and equity markets – lower LIBOR/CDS spreads
- Bank credit sluggish till September 2009 but corporate sector raised large amounts from the domestic capital market through debt and equity issuance.
- Calibration of monetary measures will depend on growth and inflationary pressures.
Serious fiscal strain
- Projected consolidated fiscal deficit: 10.09% in 2009/10 (8.6% in 2008/09). Higher revenue and primary deficit to persist.
- Debt of centre and states as a ratio of GDP is projected to increase to over 77% in 2009/10
- Need to return to fiscal consolidation
Some Policy Options – focus on agriculture and power
- Short Term - managing inflation, specially food price inflation
§ Protect and enhance rabi crop.
§ Focus on strengthening PDS distribution system
- Medium Term – Farm economy and power
§ Improve farm productivity – use technology optimally
§ Imperative need to achieve targets and have an active plan over a
time horizon of 15 years for capacity creation in electricity
§ Actively explore fuel sources like natural gas and nuclear energy
Table A: Growth – Past Performance and Projections for 2009/10
| Annual Rates | 2004/05 | 2005/06 | 2006/07 | 2007/08
QE |
2008/09
Rev |
2009/10
Projected |
|
| Percentage change over previous year | |||||||
| 1. Agriculture & allied activities | 0.0 | 5.8 | 4.0 | 4.9 | 1.6 | –2.0 | |
| 2. Mining & Quarrying | 8.2 | 4.9 | 8.8 | 3.3 | 3.6 | 10.0 | |
| 3. Manufacturing | 8.7 | 9.1 | 11.8 | 8.2 | 2.4 | 7.7 | |
| 4. Elect., Gas & Water Supply | 7.9 | 5.1 | 5.3 | 5.3 | 3.4 | 7.4 | |
| 5. Construction | 16.1 | 16.2 | 11.8 | 10.1 | 7.2 | 8.8 | |
| 6. Trade, Hotels, Transport, Storage & Communication | 10.7 | 12.1 | 12.8 | 12.4 | 9.0 | 8.4 | |
| 7. Finance, insurance, real estate & business services | 8.7 | 11.4 | 13.8 | 11.7 | 7.8 | 8.0 | |
| 8. Community & personal services | 6.8 | 7.1 | 5.7 | 6.8 | 13.1 | 8.0 | |
| 9. Gross Domestic Product (factor cost & constant prices) | 7.5 | 9.5 | 9.7 | 9.0 | 6.7 | 6.5 | |
| Industry (2 + 3 + 4 + 5) | 10.3 | 10.2 | 11.0 | 8.1 | 3.9 | 8.2 | |
| Services ( 6 + 7 + 8 ) | 9.1 | 10.6 | 11.2 | 10.9 | 9.7 | 8.2 | |
| Non-agriculture (9 – 1) | 9.5 | 10.4 | 11.2 | 9.9 | 7.8 | 8.2 | |
| GDP (factor cost, const. prices) per capita | 5.8 | 7.8 | 8.2 | 7.5 | 5.2 | 5.0 | |
| Some Magnitudes | |||||||
| GDP factor cost – 1999/00 prices (Rs trillion)
(Rs lakh crore i.e. Rs trillion) |
26.0 | 28.4 | 31.2 | 34.0 | 36.1 | 38.8 | |
| GDP market & current prices (Rs trillion) | 31.5 | 35.9 | 41.3 | 47.2 | 53.2 | 58.6 | |
| GDP market & current prices ( US$ Billion) | 701 | 810 | 913 | 1,175 | 1,166 | 1246 | |
| Population (million) | 1,089 | 1,106 | 1,122 | 1,138 | 1,154 | 1,170 | |
| GDP current & market prices per capita (Rs) | 28,894 | 32,430 | 36,802 | 41,506 | 46,107 | 50056 | |
| GDP current & market prices per capita (US$) | 643 | 732 | 813 | 1,033 | 1,010 | 1065 | |
Table B. Balance of Payments
| US$ billion | 2004/05 | 2005/06 | 2006/07 | 2007/08 | 2008/09 | 2009/10 |
| Merchandise Exports | 85.2 | 105.2 | 128.9 | 166.2 | 175.2 | 188.9 |
| Merchandise Imports | 118.9 | 157.1 | 190.7 | 257.8 | 294.6 | 306 |
| Merchandise Trade Balance | -33.7 | -51.9 | -61.8 | -91.6 | -119.4 | -117.1 |
| -4.80% | -6.40% | -6.80% | -7.80% | -10.20% | -9.40% | |
| Net Invisibles | 31.2 | 42 | 52.2 | 74.6 | 89.6 | 92.2 |
| o/w Software & BPO | 14.7 | 23.8 | 27.7 | 37.3 | 45.2 | 47.3 |
| Private Remittances | 20.5 | 24.5 | 29.8 | 41.7 | 44 | 50.4 |
| Investment Income | -4.1 | -4.1 | -6.8 | -4.3 | -4 | -6.1 |
| Current Account Balance | -2.5 | -9.9 | -9.6 | -17.03 | -29.8 | -25 |
| -0.40% | -1.20% | -1.00% | -1.40% | -2.60% | -2.00% | |
| Foreign Investment | 13 | 15.5 | 14.8 | 45 | 3.5 | 46.9 |
| o/w FDI (net) | 3.7 | 3 | 7.7 | 15.4 | 17.5 | 22.8 |
| Inbound FDI | 6 | 8.9 | 22.7 | 34.2 | 35 | 36.9 |
| Outbound FDI | 2.3 | 5.9 | 15 | 18.8 | 17.5 | 14.1 |
| Portfolio Capital | 9.3 | 12.5 | 7.1 | 29.6 | -14 | 24.1 |
| Loans | 10.9 | 7.9 | 24.5 | 41.9 | 5 | 8.7 |
| Banking Capital | 3.9 | 1.4 | 1.9 | 11.8 | -3.4 | 2.9 |
| Other capital | 0 | 1.2 | 4.2 | 9.5 | 4.2 | -1.1 |
| Capital Account Balance | 28 | 25.5 | 45.2 | 108 | 9.1 | 57.3 |
| 4.00% | 3.10% | 5.00% | 9.20% | 0.80% | 4.60% | |
| Error& Omissions | 0.6 | -0.5 | 1 | 1.2 | 0.6 | -0.8 |
| Accretion & Reserves | 26.2 | 15.1 | 36.6 | 92.2 | -20.1 | 31.6 |
| 3.70% | 1.90% | 4.00% | 7.80% | -1.70% | 2.50% | |
| Memo | ||||||
| GDP mp Rs crores | 3149407 | 3586743 | 4129174 | 5321753 | 5321753 | 5856569 |
| US$ billion | 701 | 810 | 913 | 1166 | 1166 | 1246 |
| Forex rate (Rs per US$) | 44.93 | 44.27 | 45.25 | 45.63 | 4563 | 47 |
Tags: accretion, agricultural output, capital inflows, contraction, cpi, current account deficit, fiscal policies, food grain production, food index, global financial system, household savings, indian economy, inflationary pressures, investment rate, merchandise trade deficit, monsoon, Recession, remittances, service exports
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