13 August : The Chairman, Economic Advisory Council to PM, Shri Suresh Tendulkar today released ‘Economic Outlook for 2008-09’ at a Press Conference in New Delhi today. The Economic Outlook 2008-09 was submitted to the Prime Minister on July 30, 2008.
Outgoing Chairman, Dr. C. Rangarajan and members of the Council comprising Dr. G.K. Chadha, Dr. Satish C. Jha, Dr. M. Govinda Rao and Dr. Alok Sheel were present on the occasion. Following are the highlights of the Economic Outlook:
Economy to grow at 7.7 per cent during 2008/09 as against 9% in 2007-08
Agriculture 2.0 per cent (4.5% in 2007-08)
Industry 7.5 per (8.5% in 2007-08)
Services 9.6 per cent (10.8% in 2007-08)
A number of factors inimical to growth have intensified in 2008
Sharp elevation in global commodity inflation, especially food and oil
Tightening in credit and equity markets following sub-prime crisis in the U.S
Global slowdown in growth
Impact of adverse global environment on India
Widen the current account
Pressure the fiscal system through widening subsidy bills.
Economy continues to be supply constrained, especially in
Physical and social infrastructure
Electricity, water, road/rail transportation, urban/rural infrastructure and agriculture
Robust employment growth between 1999/00 and 2004/05
2.89% CAGR by UPSS method and 2.6% by CDS method
Highest growth rates in industry and services with wide interstate variations
Outside agriculture sectoral GDP and employment growth rates moved in tandem
Investment rate similar to 2007/08, but savings projected to decline
Investment rate projected at 37.5% and savings at 34.5% of GDP
Lower savings through worsening government finances and erosion in corporate profit.
Current Account deficit estimated at 3.2% of GDP (1.5% in 2007-08)
Merchandise trade deficit $ 134.1 billion (10.4% of GDP, as against 7.7% last year)
Merchandise export growth rate 31.4% (23% in 2007-08)
Non-oil merchandize exports 22.5% higher
Merchandise import growth rate 37.8% (27% in 2007-08)
Crude oil imports 80% & non-oil, non-bullion imports 22.5% higher
Invisibles trade surplus $ 92.7 billion (7.2% of GDP, as against 6.2% last year)
Capital inflows of $ 70.9 billion ($ 108.03 billion in 2007-08)
Net reserves accretion of $ 29.4 billion ($ 92.2 billion in 2007-08)
Surge in Inflation
Mostly on account of rising global commodity prices.
Co-ordinated policy action can bring inflation down to 8-9% by March 2009.
Tight monetary stance necessary
Serious fiscal risks
Fiscal deficit targets to overreach while revenue deficits would persist.
Fiscal deficit improved through higher tax revenues and lower interest payments.
Serious fiscal risks arising from growing off-budget liabilities estimated at 5% of GDP.