IMPORTANT FEATURES OF THE ECONOMIC  SURVEY-2012-13

India’s Economic Survey 2012-13 has been released. Indian economy is expected to achieve 5.0% growth rate having 5.5% and 5.3% in first and second quarters respectively but the growth rate has fallen considerably from 9.3% in 2010-11.Agricultural growth rate is realized at 3.6% as against of 4.0% target rate. The contribution of growth in  agriculture in GDP fell down massively. The foodgrain production in million ton has come down from 259.32 in 2011-12 to 250.14 in 2012-13 but the yield of foodgrains per kg/hectares has enhanced from 1930 in 2010-11 to 2059 in 2011-12.Gross capital formation in agriculture as a percentage of agri-GDP has almost doubled in a decade and now hovers around 20% .Given capital output ratio about 4:1,this should easity give us a growth of more than 4.5% ,but even the dream of having a considerably 4% growth in agriculture still remains elusive. In 2011-12,agri-exports touched $17 billion, against imports of only $17billion ,in 2012-13,exports are likely to cross $40billion against imports of roughly $20billion. The growth rate of manufacturing value added fell considerably to  7.3% in 2012 including fall of  gross capital formation in industry(-10.8%) from 22.3% in last year. Credit growth to manufacturing down from 22.54% in Q1 to 14.83% by Q3.Over all, India’s manufacturing has stagnated at around 15% of GDP.FDI in infrastructure sector down 79% to $1.2billion from $5.8billion.The growth of Gross fixed capital formation of the economy has fallen sharply from 14% in 2010-11 to 2.5% in 2012-13.The growth of Private final consumption decreased from 8.6% in 2010-11 to 4.1% in 2012-13.Government will not breach the fiscal deficit target of 5.3% of GDP despite shortfall in revenues in the current fiscal year. Wholesale price index based inflation may decline to 6.2% in March 2013.The gap between the CPI based inflation and WPI inflation has widened due to high food inflation. The current account deficit widened to 4.6% of GDP in Q1 of 2013.The bank credit to agriculture fell from 368616 cr in 2011-12 to 142832cr in 2012-13.Both the growth in deposits and credit have fallen. The net injection/absorption of liquidity has increased too by December2012.The NPA of the banking sector has gone too high. The FDI limit in PSU banks could be increased to 26% as is the case with the insurance sector. The export fell 5.5% and imports fell less than proportionately by 0.7%.The survey said that the government can curb demand through fiscal consolidation and the RBI through that liquidity. These may have an adverse effect on growth but that is inevitable.  The Survey feels to invest more in education and health sectors including in employment generation and financing in climate change.  The agenda of the survey highlights in the manner of [i] no higher marginal rates of tax-broaden the tax base to raise tax collections,[ii] cut subsidies, rationalize expenditure to bring down the fiscal deficit,[iii] indirect nod to a large number of differently sized banks, to support small and medium enterprises,[iv] improve ease of doing business, expedite clearances,[v] further relax foreign direct investment regime.Raghuram Rajan prescribed for the economy to revive growth and rebalance national spending from consumption to investment by [i] increasing government saving,[ii] incentivizing financial savings through real high returns,[iii] removing bottlenecks to investment and job creation ,[iv] reducing costs of raising finance, and [v] combating inflation through monetary and supply side measures.The Deputy Chairman of the Planning Commission,M.S.Aluwalia hoped that the projection of 6.7% growth for 2013-14 is not optimistic by raising tax:GDP ratio.