Finance Minister tabled Economic Survey

Before presenting the Union Budget 2008 on February 29, Finance Minister P Chidambaram today tabled the ‘Economic Survey 2007-08’ before the Parliament expecting the Gross Domestic Product (GDP) growth to remain at 9% level, while survey tells different story indicating it to be go down from current 9.6% to 8.7 % for the next fiscal.

The annual economic survey is usually presented every year, a day before presenting the Union Budget. Following the system, Finance Minister today presented the Economic Survey that probes the economic growth might be slipped downwards and can be stable at 8.7%, slightly 0.02% above, as per RBI expectation.

Presenting the budget before the parliament, Chidambaram said, “I am optimistic about growth and containment of inflation in the coming year, which will be my priority”.

Finance Minister hopes that 9% of growth rate can be achieved in the 11th five-year plans by controlling inflation rate. “I would like to provide continue conducive investment climate and manage the macro economy to facilitate non-inflationary growth,” he said.

Speaking over average income growth, Finance Minister said, “The growth is reflected in a near doubling of the pace at which the average income of our people is growing. If the rate of growth of per capita GDP at market prices continues at a five-year average of 7.2% per year, average income would now double in a decade instead of a generation or more.”

However, survey shows that capital inflows can put pressure on prices. The major cause behind the pressure might be Rupee appreciation, sluggish Infrastructure and dipping US economy condition. There are four major challenges before the government-slow growth rate in agriculture, infrastructure, education and skill development areas-to achieve this target, the survey reveals.

Speaking over government sector jobs, Chidambaram said, “With better targeting of government services and an increase in their quality, we can ensure that overall welfare of the common man in terms of both private consumption and supply of public goods continues to increase rapidly.”

Being optimistic over higher growth rate, the FM said, “There are a number of things going in favour of India; we need to capitalise on these opportunities.”

The economic survey indicates that some sectors may most probably go down including consumer durables, export and agro sectors only because of slowdown in the manufacturing sector due to high inflation and lackluster infrastructure. Agriculture is the prime sector, which may be the major cause of worry because despite of government’s massive efforts, agricultural sector going downward this year too and the data suggest it’s deepening further. As it is known that Agriculture is the backbone of Indian economy and more than 60% of the population is involved in this field, thus the decrement in this sector can badly affect the GDP sectors.

Economic Survey of 2007-2008: Highlights

• Economic growth slows to 8.7% from 9.6% in the previous fiscal
• Employment growth has risen to 2.6% on the contrary the unemployment growth rate has raised much faster in the last five years from 7.3% to 8.3%. Thus the condition becomes worse.
• 100% Foreign Direct Investment has been allowed in consumer durable, semi-durable and luxury brand chains; while proposes to make allow same investment in the public and private sector banks.
• Fiscal deficit should goes to under 3% to ease the pressure on the rupee and to follow the RBI’s monetary policy more effectively along with reducing the gap with other countries
• Agriculture growth down to 2.6% from 3.8% in this fiscal
• Manufacturing growth also goes down to 9.4% from 12%
• Food grains production marginally higher at 219.3 million tons
• Inflation projected at 4.4% for fiscal 2007-08
• Outlook for exports in 2008-09 not bright due to global economy slowdown
• Government sets a target of 9% GDP in 11th five year plan

The economic survey only recommends the suggestion to Finance Ministry but cannot force to accept by the ministry. It is up to Finance Ministry to accept the proposal of survey committee completely, partially or absolutely not.