9% growth next fisc,unrest in M-E, inflation dampeners: Survey

New Delhi, Feb 25 (PTI) Inflation will remain a priority
for the Indian government which projected over 9 per cent
economic growth in the next fiscal even as downside risks
emerge from rising oil prices due to turmoil in the
Middle-East.
The Economic Survey 2010-11, tabled in the Lok Sabha by
Indian Finance Minister Pranab Mukherjee, said tight monetary
policies would have to stay to curb inflation and mitigate
global risks such as rising food and commodity prices and debt
problems in the European nations.
Ahead of the general Budget, the Survey made out a case
for gradual exit of stimulus provided to the industry to
combat the impact of the global financial crisis in 2008-09.
Insisting that the inflation is clearly the "dominant"
concern, the Survey said "current growth and inflation trend
warrant persistence with an anti-inflationary monetary
stance". Consolidation of fiscal deficit would also be
essential to check the price rise, it added.
"Inflation is a matter of great concern, no doubt. Just
one year ago in February 2010 food inflation was as high as
20.2 per cent...though it is high but it has come down in
January...still it is an area of concern and we shall have
to work on it, particularly in the context of global economic
crisis," Mukherjee told reporters after tabling the Survey.
The Survey, considered a report card on the economy,
listed rising international oil prices and sovereign debt
problems in the Euro zone and the political turmoil in the
Middle-East as the downside risks for the Indian economy.
Higher current account deficit due to impact of fragile
global recovery on Indian exports and increasing domestic
consumption was listed as an area of concern.
"The problem may be further aggravated by the rising
international oil prices," it added.
For the current fiscal, the Survey said, the economy
would grow by 8.6 per cent, up from 8 per cent a year ago. "It
is expected that the growth will breach the 9 per cent mark in
2011-12", reaching the pre-crisis levels.
The Survey also suggested a set of reforms, including
streamlining of land acquisition and environmental clearance
norms, to expedite infrastructure projects, a crucial driver
of growth.
Besides, it also pitched for opening of the Foreign
Direct Investment (FDI) in multi-brand retail starting with
metro cities. "FDI in retail may help bring in technical
knowhow to set up efficient supply chains which could act as
models of development," the Survey.
It also pressed for reforms in banking and insurance
sector.
The Survey suggested private participation in social
sectors such as health and education in the form of
public-social-private-partnership to supplement the government
efforts.
India, the Survey said, needs a policy to bring another
round of multifaceted reforms for the industrial sector to
have a sustained double-digit output growth in the medium to
long term.
In the short-term, the sector is likely to grow at
moderate but sustainable rate. However, increasing cost of
financing and slowdown in foreign equity inflows in the
current financial year are causes for concern.
"Over the medium to long term, to sustain double-digits
output growth and reduce the vulnerabilities of the sector,
there is a need to put in place a policy framework for
embarking on another round of multifaceted reforms," it said.
It also pitched for giving banking licenses to industrial
houses wanting to set up banks to promote the goal of
financial inclusion.
"As regards allowing industrial houses, business houses
and NBFCs to promote banks, they may be allowed full banking
license with provision for avoiding conflict of interest
issues," it said.
On India's exports, it said that shipments will surpass
the USD 200 billion target for the current fiscal and the
gradual roll-back of stimulus measures is not likely to impact
growth of the country's overseas shipments.
On insurance, it said that there will be different set of
norms for life and non-life insurance companies for coming out
with a public float.
"It is proposed that the disclosure requirements for life
and non-life companies would be separately mandated given the
nature of their respective business," the Survey said.
It added that investors would be required to be
made aware of the financial performance, company profile,
financial position, risk exposure, corporate governance and
management of these companies.
To contain excessive flow of foreign capital, it said
that India should work closely with G-20 countries to take
collective steps.
"We will have to keep open the options of having to take
corrective measures, should these flows affect us adversely.
The most important step in this context is to work with the
G-20 countries and try to figure out collective decision
rules, whereby each country tries to intervene minimally in
the flow of capital," the Pre-Budget Survey said.
It further said, "when it does intervene, it does so
taking into account the externalities on other nations."
The continuing debt turmoil in the euro zone area could
have an adverse fallout on the Indian economy, hurting its
capital flows as well as exports, it added.
The Economic Survey pegged the fiscal deficit for 2010-11
at 4.8 per cent, lower than the Budgetary estimates of 5.5 per
cent, on the back of higher realisation from 3G spectrum
auction and buoyancy in revenues.
India's fiscal deficit had ballooned to 6.3 per cent of
the GDP in 2009-10 in view of stimulus spending worth billions
of dollars to combat global financial meltdown, and was pegged
at 5.5 per cent for the current fiscal.
Calling for bold reforms in the power sector, the
Economic Survey asked the states to reduce subsidies and
cross-subsidies on electricity and hike tariffs.
India currently has one of the lowest and most
uneconomical average electricity tariffs in the world -- 8
cents per unit at the retail level, compared to about 12-15
cents in countries endowed with more coal or gas and 19-10
cents per unit elsewhere, it said.
On agriculture, it said that special efforts are required
to promote production and productivity of all coarse cereals
to ensure food and nutritional security of India.
"There is every reason to promote the production of
coarse cereals particularly in the rain-fed areas by
increasing investment in research and the schemes," the Survey
tabled in Parliament by Pranab Mukherjee said.
Further it warned that India, despite being the world's
largest producer, could become a net importer of milk in next
decade if the growth in the sector is not accelerated to 5.5
per cent annually.
The report said the country has not been able to keep
pace with the domestic demand for milk which is growing at
about 6 million tonnes annually.