New Delhi: India's
economic growth will rebound to 7.6 percent in 2012-13 on the back
of softening inflation and better industrial production, enabling
it to play an active role on the world stage and influencing
international trade, capital flows and governance of global
financial institutions, the Economic Survey 2011-12 said Thursday.
The survey, tabled by Finance Minister Pranab Mukherjee in
parliament, projected 8.6 percent expansion in the country's gross
domestic product (GDP) in 2013-14.
"The economic growth is expected to remain at 7.6 percent, plus or
minus 0.25 percent, in 2012-13 and it will improve further to 8.6
percent in 2013-14," said Chief Economic Advisor Kaushik Basu.
The economy is estimated to expand 6.9 percent in the current
financial year ending March 31.
The survey, presented a day before the annual budget, said
inflation will remain in the range of 6.5-7 percent by the end of
March. It projected a further moderation in inflationary pressure
"A favourable base effect in prices and continued global slowdown
are expected to moderate inflation to around 6.5 to 7 percent by
March and further moderate in the months ahead, barring unexpected
shocks, such as oil prices in international markets.
It may further moderate during 2012-13 due to tightening of
monetary policy and other measures put in place by the
government," the survey added.
Inflation in the current fiscal has largely been driven by high
food prices. It had slipped to a low of 6.6 percent in January,
but rebounded to almost 7 percent in February.
The survey, however, said fiscal consolidation was the only way to
keep inflation down.
"But despite the low growth figure of 6.9 percent, India remains
one of the fastest growing economies of the world as all major
countries including the fast growing emerging economies are seeing
a significant slowdown."
According to the survey, industrial production is likely to
improve in the next financial year.
The survey also touched on politically contentious issues like
allowing foreign direct investment in multi-brand retail and
reducing subsidies especially on diesel.
"Allowing FDI in multi-brand retail is one of the major issues in
this sector. This could begin in a phased manner in the metros,
with the cap at a lower level coupled with incentivising the
existing 'mom and pop' stores (kirana shops) to modernise and
compete effectively with the retail shops, foreign or domestic,"
The decision to allow foreign direct investment (FDI) in
multi-brand retail was rolled back after a huge furore in the
parliament with opposition and even key constituents of the United
Progressive Alliance government vehemently opposing it.
Talking to reporters outside parliament shortly after tabling the
annual document, the finance minister said the survey would help
create healthy discussions, but the government would not be able
to implement it in totality.
"The government may adopt few suggestions but one should not
expect that the Budget will reflect the survey in its entirety,"
The survey suggested that diesel price should be revised upward
and taxes on diesel-run vehicles should be increased to control
"Diesel price adjustments have lagged international prices in
recent years, and budgetary subsidies have ballooned. At the same
time such low prices and subsidies are providing incentives for
misuse," the document said.
Recognising that self-interest drives a market economy, the survey
said India will stagnate and remain in the grips of chaotic
poverty in the absence of morality and persistence of graft.
"We now know that a market economy cannot function if people are
totally self-serving," said the survey.
"While self-interest is a major driver of economic growth, it is
important to recognize that honesty, integrity, and
trustworthiness constitute the cement that binds society."
As the country enters the 12th Five Year Plan April 1, the survey
said, the challenges before it are to lay down a sound foundation
with a major push for building infrastructure, building human
capital, and eradicating poverty and malnutrition.