summary of economic survey 2012-13

7/28/2019 Summary of Economic Survey 2012-13

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Approach: 10 min from Kodambakkam R.S, Maambalam R.S, and Panagal Park B.S.

SUMMARY OF ECONOMIC SURVEY 2012-13

More than 6 Per Cent Growth Forecast for Next Fiscal ConsiderableEnhancement for Social Sector Spending India on Verge of Creating Quality

Jobs to Seize Demographic Dividend

Indian economy is likely to grow between 6.1% to 6.7% in 2013-14 as the downturn ismore or less over and the economy is looking up. Following the slowdown induced by the globalfinancial crisis in 2008-09, the Indian economy responded strongly to fiscal and monetary stimulusand achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in 2009-10 and 2010-11,but due to a combination of both external and domestic factors, the economy decelerated growingat 6.2% and an estimated 5% in 2011-12 and 2012-13 respectively. The Economic Survey 2012-13,presented by the Finance Minister Shri P. Chidambaram in the Lok Sabha predicts that the globaleconomy is also likely to recover in 2013 and various government measures will help in improvingthe Indian economys outlook for 2013-14. While Indias recent slowdown is partly rooted in

external causes, domestic causes are also important. The slowdown in the rate of growth of servicesin 2011-12 at 8.2%, and particularly in 2012-13 to 6.6 percent from the double-digit growth of theprevious six years, contributed significantly to slowdown in the overall growth of the economy,while some slowdown could also be attributed to the lower growth in agriculture and industrialactivities. But despite the slowdown, the services sector has shown more resilience to worseningexternal conditions than agriculture and industry. For improved agricultural growth, the surveyunderlines the need for stable and consistent policies where markets play an appropriate role,

private investment in infrastructure is stepped up, food price, food stock management and fooddistribution improves, and a predictable trade policy is adopted for agriculture. FDI in retailallowed by the government can pave the way for investment in new technology and marketing ofagricultural produce in India. Fast agricultural growth remains vital for jobs, incomes and foodsecurity.

The survey points out that the priority for the Government will be to fight high inflation byreducing the fiscal impetus to demand as well as by focusing on incentivizing food productionthrough measures other than price supports. But unlike the previous year, when food inflation wasmainly driven by higher protein food prices, this year the pressure has been coming mainly fromcereals. On the Balance of Payments and External Position, the survey highlights that with netexports declining, Indias balance of payments has come under pressure. Moreover, in the current

fiscal, foreign exchange reserves have fluctuated between US$ 286 billion and US$ 295.6 billion,while the rupee remained volatile in the range of Rs 53.02 to Rs 54.78 per US dollar during October2012 to January 2013.

The survey had a special chapter focusing on jobs. The future holds promise for Indiaprovided we can seize the demographic dividend as nearly half the additions to theIndian labour force over the period 2011-30 will be in the age group 30-49. India is creating jobs inindustry but mainly in low productivity construction and not enough formal jobs in manufacturing,which typically are higher productivity. The high productivity service sector is also not creating


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enough jobs. As the number of people looking for jobs rises, both because of the populationdividend and because share of agriculture shrinks, these vulnerabilities will become important.

Because good jobs are both the pathway to growth as well as the best form of inclusion, India has tothink of ways of enabling their creation.

The survey calls for a widening of the tax base, and prioritization of expenditure as keyingredients of a credible medium term fiscal consolidation plan. This along with demandcompression and augmented agricultural production should lead to lower inflation, giving the RBIthe requisite flexibility to reduce policy rates. Lower interest rates could provide an additional fillipto investment activity for the industry and services sectors, especially if some of the regulatory,bureaucratic, and financial impediments to investment are eased. On financial sector reform, ittakes note of the high level of gross NPAs (non-performing assets) of the banking sector whichincreased from 2.36 percent of the total credit advanced in March 2011 to 3.57 percent of totalcredit advanced in September 2012. The survey suggests that revival of growth will help contain

NPAs, but more attention will have to be paid to whether projects are adequately capitalized upfront given the risks. Expenditure on social services also increased considerably in the 12th Plan,with the education sector accounting for the largest share, followed by health. In the 11 th Planperiod nearly 7 lakh crore rupees has been spent on the 15 major flagship programmes. A numberof legislative steps have also been taken to secure the rights of people, like the RTI, MGNREGA, theForest Rights Act, AND THE Right to Education. However, the survey notes that there are pressinggovernance issues like programme leakages and funds not reaching the targeted beneficiaries thatneed to be addressed. Direct Benefit Transfer (DBT) with the help of the Unique IdentificationNumber (Aadhaar) can help plug some of these leakages. With the 12th Plans focus onenvironmental sustainability, India is on the right track. However, the challenge for India is tomake the key drivers and enablers of growth-be it infrastructure, the transportation sector,housing, or sustainable agriculture-grow sustainably.

Dr. Raghuram G. Rajan, Chief Economic Adviser, Ministry of Finance writes in an introductionto the Survey that these are difficult times, but India has navigated such times before, and with goodpolicies it will come through stronger. Slowdown is a wake-up call for increasing the pace of actionsand reforms. The way out lies in shifting national spending from consumption to investment,removing the bottlenecks to investment, growth, and job creation, in part through structuralreforms, combating inflation both through monetary and supply side measures, reducing the costsfor borrowers of raising finances and increasing the opportunities for savers to get strong realinvestment returns.


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Seizing the Demographic Dividend - Grabbing Opportunities for the IndianWork Force

The future holds good promise for India provided we can seize the demographic dividend, asnearly half the additions to the Indian labour force over the period 2011-30 will be in the age groupof 30-49 years. Also, productive jobs are vital for growth and a good job is also the best form ofinclusion. Since more than half our population depends on agriculture but the experience of othercountries suggests that the number of people dependent on agriculture will have to shrink if percapita incomes in agriculture are to go up substantially. This was mentioned in the EconomicSurvey for the year 2012-13 which was tabled the Union Finance Minister Shri P. Chidambaram inthe Lok Sabha today.

While industry is creating jobs, too many such jobs are low-productivity non-contractual jobs in theunorganized sector, offering low incomes, little protection, and no benefits. Service jobs arerelatively high productivity, but employment growth in services has been slow in recent years.Indias challenge is to create the conditions for faster growth of productive jobs outside ofagriculture, especially in organized manufacturing and in services, even while improvingproductivity in agriculture. The benefit of rising to the challenge is decades of strong inclusivegrowth.

The Survey shows that since 1991, the beginning of economic reforms in India we are growing at asimilar rate more or less as Indonesia but China and Korea grew faster in terms of per capitaincome as well as our share in world trade.

The Survey has expressed concern over the inability of service sector for not creating jobs. It says,in addition to labor regulations the lack of properly educated and skilled work force is also a factor.As suitable higher education is important for high-end services such as information technology,software development and finance. The Mid-level services such as retail trade, hotels, andrestaurant services also require adequate skilling of the labour force. In this connection, schemessuch as the formal apprenticeship programme of the government which places employers at theheart of education, can play a powerful role in imparting job-relevant skills and also re-training andupgrading the labour force. In its current form the Act and Rules governing the apprenticeship areoutdated and rigid from both the perspective of employers and employees. Here changes areneeded. Also, the challenge is to address both quality and quantity issues in skill development andtrain so as to correct the mismatch between employers who do not get people with requisite skillsand millions of job seekers who do not get employment . To this end the National Skill Development

Mission aims to impart employment-oriented vocational training to 8 crore people over the nextfive years by working with State governments/State Skill Missions and incorporating the privatesector through PPPs and for profit vocational training and NGOs. Basic education is also animportant input for enhancing human capital.

We stand at a cross roads where we need to develop a clear strategies for continued growth. It alsosuggests that for creating better employment facilities in industrial sector. We need to formulate acommon policy on business development and regulation; help business facilitation; simplifyregistrations for starting up; ease burden of compliance as the firm grows; allow for easy exits;


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transform employment exchanges to enable effective job matching; improve value/benefits fromstatutory pre-emptions and reduce attractiveness of staying small.

In a nut-shell India has to focus on an agenda to create productive jobs outside of agriculture whichwill help up reap the demographic dividend and also improve livelihood in agriculture. We need toexamine carefully whether regulations contain business excessively and, if so, strip away the excessregulation while ensuring adequate protection and minimum safety nets for workers. Buildinginfrastructure and expanding access to finance will also help. While the government is clearly inthis process, some further steps need greater debate and action.

Industrial Relations Climate Generally Remained Peaceful and Cordial;Number of Strikes and Mandays Lost Show Declining Trend

The Economic Survey for the year 2012-13 tabled in the Lok Sabha today by the Union Finance

Finance Minister Shri P. Chidambaram shows that due to constant endeavour of the industrial

relations by machineries of both the Central and the States the industrial relations climate has

generally remained peaceful and cordial. While the number of incidences of strikes and lock-outs

reported during 2007 were 389, this figure was 189 in 2011 (provisional) and stood at 194

(provisional) up to October 2012. The number of strikes has exhibited a declining trend over the

period. Similarly, the figures for man-days lost were 27.17 million in 2007 and 2.03 million

(provisional) for 2012.

As regards spatial/industry-wise dispersions of incidents of strikes and lock-outs there exists wide-

spread variations amongst different states/UTs. Wage and allowances, bonus, personnel,

indiscipline and violence and financial stringency have been stated to be the major reasons for

these strikes and lock-outs.

Upward Trend in Employment Maintained; Overall Employment Increased by6.94 Lakh in June 2012 Over June 2011

Upward trend in employment since July 2009 continues despite the economic slowdown as per the

Fifteenth Quarterly Employment Survey by the Labour Bureau. This has been reflected in the

Economic Survey for the year 2012-13 tabled in the Lok Sabha today by the Union Finance Finance

Minister Shri P. Chidambaram.

Overall employment in June 2012 over June 2011 has increased by 6.94 lakh, with the highest

increase recorded in IT/BPO(4.44 lakh) sector followed by 1.70 lakh in Textiles including Apparels,


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0.45 lakh in Transport, 0.26 lakh in Metals, 0.19 lakh in Gems and Jewellery and 0.11 lakh in

Automobiles sectors during the period.

On the other hand, employment in handloom/powerloom and leather sectors has marginally

declined during this period.

In export oriented units, employment at the overall level has increased by 5.81 lakh whereas in the

non-exporting units, it has increased by 1.10 lakh during the period June 2012 over June 2011.

During the quarter from March to June 2012, employment increased in respect of only Textiles

including Apparels followed by IT/BPO and Gems & Jewellery. There was no growth in employment

in the Leather, Transport and Handloom/Powerloom sectors, while sectors like Metals and

Automobiles registered negative growth. Overall employment has increased by 0.73 during this

quarter.

The results of the 15th quarterly survey reveal that there has been a sustained and consecutive

increase in employment in both the public and private sectors covered at overall level during the

last eleven quarters with a total addition of 30.73 lakh employment during this recovery period.

India Has Highest Increase in Share of Services in GDP at 8.1%A comparison of the services performance of the top 15 countries for the 11 year period from 2001

to 2011 shows that the increase in share of services in GDP is the highest for India with 8.1

percentage points. These 15 top countries include major developed countries alongwith Brazil,

Russia, India and China. While Chinas highest services compound annual growth rate (CAGR) stood

at 11.1%, Indias very high CAGR of 9.2% was second highest and also accompanied by highest

change in its share. This is a reflection of the fact that India s growth has been powered mainly by

the services sector.

Indias services sector has emerged as a prominent sector in terms of its contribution to national

and state incomes, trade flows, FDI inflows and employment. For more than a decade the sector has

been pulling up the growth of Indian economy with great stability. The share of services in Indias

GDP at factor cost (at current prices) increased from 33.3% (1950-1951) to 56.5% in 2012-13, asper advance estimates. Including construction, this would increase to 64.8%. With 18%, trade,

hotels and restaurants are the largest contributors to GDP among the various sub sectors. This is

followed by financing, insurance, real estate and business services with 16.6% share. Community,

social, and personal services with 14% share stand in the third place. This is followed by

construction at fourth place with 8.2% share.

In 2011-12, although the growth of trade sub-sector decelerated to 6.5%, its share improved to

16.6%. The share of the sub-sector transport by other means was 5.4%, while its growth was


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8.6%. Banking and insurance was the most dynamic sector in 2011-12 with growth of 13.2%.

Other services had a share of 7.9% in 2010-11 and 2011-12. It grew at 6.5% in 2011-12.

Chandigarh Tops with Highest Share of Services in GSDP with 85%With 85% of share of services in the GSDP, Chandigarh leads other states followed by Delhi at

81.8%. Other states such as Kerala, Mizoram, West Bengal, Tamil Nadu, Maharashtra, Nagaland and

Karnataka have higher than all India share. Other than Arunachal Pradesh (33.8%), Chattisgarh

(36.7%) and Sikkim(37%), all other states registered more than 40% share of services sector in the

GSDP.

Robust Inflow of FDI in the Services SectorIndias Share of Services Exports Increasing Faster than Share of Merchandise

Exports

The FDI inflows in the services sector grew robustly at 57.62% compared to the growth of overall

FDI inflows at 33.6%, in 2011-12. However, in April-November, 2012-13, overall FDI inflows fell by

43.3% to US $ 15.85 billion from US $ 27.93 billion in the corresponding period in the previous

year. FDI inflows in the top five services also fell by 9.7% to US $ 8.19 billion.

The Government has taken many policy initiatives to liberalize FDI policy for services sector. This

includes increasing FDI limit from 49 to 74% in teleports and DTH and cable networks, permitting

FDI upto 74% in mobile TV, upto 49% in scheduled and non-scheduled air transport services andupto 50% in multi-brand retail trading. The Government has also amended the existing policy on

FDI in single brand product retail trading.

The share of services export of India in the world exports of services has been increasing faster

than the share of merchandise exports in world exports. It grew from 0.6% in 1990 to 1% in 2000

and 3.3% in 2011. The overall openness of the economy reflected by total trade including services

as a percentage of GDP shows higher degree of openness at 55% in 201-12 as compared to 38.1% in

2004-05. The openness indicator based only on merchandise trade is 43.2% in 2011-12, as

compared to 28.3% in 2004-05.


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Tourism, Railways and Telecom Continue to Lead Other SectorsForeign Tourist Arrivals (Ftas) Grow by 9.2% In 2011

Telecom, Tourism and Railways have shown better performance compared to other services like

aviation, shipping, ports and storage. The telecom connections (wire and wireless) increased from

4297.25 lakh in 2008-09 to 9513.4 lakh in 2011-12. The data till 31st December, 2012 shows that

8955.1 lakh connections have been provided. In the tourism sector the number of foreign tourists

visiting India increased from 5.28 million in 2008-09 to 6.31 million in 2011-12. The number of

arrivals as on 31st December, 2012 was 6.65 million. The foreign exchange earnings from foreign

tourist arrival grew from US $ 11832 million to US $ 16564 million in 2011-12. The earnings till

31st December, 2012 were US $ 17737 million. The Railways sector also performed well by

registering 969.78 million ton of freight traffic carried by Railways in 2011-12 as compared to

833.31 million ton of freight transported in 2008-09. The net ton kilometres of Railways increased

from 538226 million in 2008-09 to 639768 million in 2011-12.

As per the 12th Five Year Plan approach paper, India s travel and tourism sector is estimated to

create 78 jobs per million rupees of investment compared to 45 jobs per million rupees in the

manufacturing sector. The foreign tourist arrivals in the country grew by 9.2% in 2011. This

however was moderated to 5.4% in 2012 as a result of the global slowdown and Euro-zone crises.

Domestic tourism continues to be an important contributor to the sector with 14.34% CAGR of

domestic tourist visits from 1991-2011. The hotels and restaurants sector with 1.5% share in

Indias GDP for 2011-12 is an important sub component.


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3 Per Cent Growth in Traffic Handled by Ports During 2011-12Non Major Ports Grow by 11.5 Per Cent

The total traffic handled by all ports in the country grew by 3% in 2011-12 over the previous year.

This stood at 911.7 million tons. 11.5% growth achieved by non-major ports contributed to the

overall traffic growth, although there was a decline in traffic handled at major ports. The traffic

handled by all ports grew by 1.8% in the first half of 2012-13 (April September) over the

corresponding period of the previous year. The share of the non-major ports in this growth was

10.3%.

The three port related performance indicators i.e. average turnaround time (in days), average pre-

berthing detention time (in days) and average output per ship berth day (in tons) have shown

improvement in 2011-12 and April-September, 2012 over corresponding previous period. The

average output per ship-berth-day improved to 13,374 tons for all major ports during April-

September, 2012-13 compared to 12,825 tons in corresponding period of 2011-12. The average

turnaround time at major Indian ports improved to 4.15 days in 2012-13 (April-September) as

against 5.29 (2010-11) and 5.05 (2011-12).

The average pre berthing detention time (PBDT) for all major ports declined from 2.32 days in

2010-11 to 2.04 in 2011-12. According to the Economic Survey, this could be a result of the lower

volumes handled by ports due to the global turn down.


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Legal Services Show a Steady Annual Growth of 8.2%Free Legal Services Benefit More than 7.82 Lakh Persons

Legal services in the country have been growing at a steady annual rate of 8.2% from 2005-06 to

2011-12. The Indian legal profession consists of nearly 1.2 million registered advocates, about 950

Law schools and approximately 4 to 5 lakh law students. Every year approximately 60,000 to

70,000 law graduates join the legal profession. India is ranked 45,with a score of 4.5 in terms of

judicial independence by the Global Competitiveness Report 2012-13. This is an improvement from

2011-12 when it was ranked 51. As regards efficiency in the legal framework in settling disputes,

India has improved its position from 64 rank in 2011-12 to 59 in 2012-13 with a score of 3.8.

India is regarded as one of the best Legal Process Outsourcing (LPO) destinations on account of the

low cost of legal professionals (which is 50-80% more cost competitive than USA and UK),geographical advantage (Indian Time Zone allows it to offer legal services round the clock),

language proficiency, and the legal system which is inspired by those of USA and UK. This is also

because the LPO industry in the country can make use of advanced means of communication

technology, and legal support in the form of research document reviews, drafting of documents,

making applications for patents and various paralegal and administrative services.

Through the free legal services available in country, more than 7.82 lakh persons have benefited

during 1st April, 2012 to 31st October, 2012. Of this, more than 23,000 belong to the Scheduled

Caste and about 20,000 persons are Scheduled Tribes. More than 37,000 women and 5,900 children

have also benefited through these free services. In addition, more than 54,000 Lok Adalats have

settled 17.3 lakh cases during the same period. Under the National Legal Services Authority (NLSA),

through the Paralegal Volunteers Project 73,555 PLVs have been trained in the country and have

started functioning. These volunteers impart legal awareness to various target groups, thus

bridging the gap between common people and legal service institutions.


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Energy Production and Consumption: A Snap ShotDuring the 11th Five Year Plan, nearly 55,000 MW of new generation capacity was created. Yet

there continues to be an overall energy deficit of 8.7% and peak shortage of 9%. The potential for

energy generation depends on the countrys natural resource endowment and the technology to

harness it. As on March, 2011 Indias estimated coal reserves were about 286 billion ton, 81 billion

ton of lignite, 757 MT of crude oil and 1241 billion cubic meter (BCM) of natural gas. The estimated

hydro potential (about 25 MW) is about 145 GW. The total potential for renewable power

generation from various sources other than large hydro projects stood at 89,760 MW. The 12th

Plan has projected total domestic energy production of 669.6 million tons of oil equivalent (MTOE)

in 2016-17 and 844 MTOE in 2021-22. This will meet around 71% and 69% of expected energy

consumption with the balance to be met from imports which are projected to be 267.8 MTOE in

2016-17 and 375.6 MTOE in 2021-22. Import dependence in case of crude oil is projected to be

78% while that in coal will be 22.4% by 2016-17. The report says that coal and lignite will continue

to dominate the energy scenario in the country. By 2021-22, their share will be about 66.8% in the

total commercial energy produced and about 56.9% in total commercial energy supply.

The trend in production of the primary sources of conventional energy such as coal, lignite, crude

petroleum, natural gas and electricity shows that in the last four decades i.e. from 1970-71 to 2010-

11, the Compound Annual Growth Rate (CAGR) of production of coal, lignite, crude petroleum,

natural gas and electricity (hydro and nuclear) generation was 5% , 6.1%, 4.3%, 9.1% and 4%

respectively. In terms of energy equivalent of all primary energy sources in 2010-11, the share of

coal and lignite, electricity (hydro and nuclear) and natural gas was 52%, 28% and 11%respectively.

Trends in consumption of energy from conventional sources indicate that from 1970-71 to 2010-

11, consumption of coal, lignite, crude oil in terms of refinery throughput, and electricity (thermal,

hydro and nuclear) grew at a CAGR of 5.3%, 6.05%, 11.25% and 6.63% respectively. Growth of total

energy consumption from all conventional sources in terms of peta joules was 6.04% during 1970-

71 to 2010-11. The per capita energy consumption grew at an average annual rate of 5.3% during

this period. The consumption pattern of energy by primary sources expressed in terms of peta

joules indicates that electricity generation accounted for about 51% of the total consumption of all

primary sources of energy during 2010-11, followed by coal and lignite which stood at 25% and

crude petroleum which was pegged at 20%.


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More than 3.7 Lakh Villages Provided Electricity Through Rajiv GandhiGrameen Vidyutikaran Yojana

More than 3.79 lakh villages across the country have been provided electricity through the Rajiv

Gandhi Grameen Vidyutikaran Yojana (RGGVY). The rural electrification scheme launched in April,

2005 has provided electricity to 1,06,116 unelectrified villages and intensive electrification in

2,73,328 partially electrified villages. It has also provided free electricity connections to 202.6 lakh

below poverty line (PBL) households as on 30th November, 2012. In addition, capital subsidy of Rs.

26,664 crore has been utilized under the scheme so far.

The rural electrification scheme was launched with the objective of providing all rural households

access to electricity through creation of appropriate rural electricity infrastructure. Under this

scheme, the Government of India provides 90% capital subsidy for the project.

Spurt in Refining Capacity and Pipeline NetworkThe total refining capacity in the country increased from 187.4 MMT (as on 1.4.2011) to 215.1 MMT

(as on 1.1.2013) and is projected to reach 218.4 MMT by the end of 2012-13 and 239.6 MMT in

2013-14 with capacity augmentation of existing refineries and commissioning of the Paradip

Refinery. Refinery production (crude throughput) during 2011-12 was 211.14 MMT (including the

Kamnagar Refinery under special economic Zone (SEZ) by Reliance Industry Ltd) showing anincrease of 2.6 % compared to a production of 206.15 MMT in 2010-11. The refinery production

(crude throughput) during April-November 2012-13 is 141.45 MMT. The Economic Survey notes

that the country is not only self-sufficient but also substantially exports petroleum products. During

2011-12, India exported 60.84 MMT of petroleum products worth Rs. 2,66,486 crore.

There has been substantial increase in the pipeline network in the country. At present there are 32

product pipelines spread over a length of 11,274 km with capacity of 70.688 MMT. In addition to

this, there are 16 crude pipelines over 8,558 km with capacity of 106.45 MMT, LPG pipelines of

2,313 km with 3.94 MMT capacity and gas pipelines of 13,428 km with 355 MMSCMD capacity. The

Economic Survey mentions that the pipeline infrastructure is being strengthened with 14,889 km of

new pipeline network with an additional capacity to transport 264 MMSCMD of gas by 2015-16. In

addition to this, around 4,300 km of pipeline network has been authorized by the Petroleum and

Natural Gas Regulatory Board (PNGRB) which will transport 184 MMSCMD of gas.


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Railway Freight Grows by 5.1 PER CENTFreight loading by Indian Railways during the fiscal 2011-12 registered an increase of 5.1%. TheRailways carried a total freight of 969.1 MMT as against 921.7 MMT in 2010-11. The total freight

target for 2012-13 has been fixed at 1025 MMT (BE). During April-November, 2012, Indian

Railways carried 647.1 MMT of revenue earning freight traffic. This is 4.7% higher than the traffic

carried (618.05 MMT) during corresponding period of the previous year.

Various schemes have been initiated by Indian Railways towards passenger comfort and safety.

Some of them are as follows

- Under the Adarsh scheme launched in 2009, Adarsh stations are provided with basic amenities

such as drinking water, toilets, catering services, waiting rooms and dormitories specially for

women passengers.

- Of the 976 stations identified, 616 have been developed so far. Computerized unreserved ticketing

system is made available at 5560 locations with 10,172 counters by end of November, 2012.

- About 250 automatic ticket vending machines were commissioned during 2012-13 making the

total number of such machines 808.

- The Rake Management System (RMS) has been implemented at 246 locations. It covers all major

yards/lobbies and control offices at various divisions and zones.

- High speed passenger trains, popularly referred to as bullettrains travelling at speeds above 350

kmph, will soon be a part of the Indian Railways. Seven corridors have been identified for

conducting the pre feasibility study.

- Till December, 2012 Linke Holfmann Busch (LHB) coaches have been inducted in 14 Rajdhani, 12

Shatabdi and 11 AC Duronto services. LHB coaches have higher carrying capacity, better riding

comfort, higher speed potential, longer life, provision of control discharge toilet system, lower

maintenance requirement and enhanced safety features.

- Eight trains have been installed with 436 eco friendly bio toilets. A complete switch over to bio

toilets in the new coaches has been planned by 2016-17.


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Government to Expedite Projects Under NHDPThe Government of India has taken several initiatives to expedite highway projects underthe National Highway Development Project (NHDP). These are

- NHAI Board has approved formation of a High Level Expert Settlement AdvisoryCommittee for one time settlement of old cases pending in court.

- A new model of Engineering Procurement and Construction (EPC) contracts is beingbrought in. Highways which are not viable to be constructed under the BOT(toll) modewill be taken up under the new EPC mode. Under this modified turnkey EPC note, theGovernment will provide 100% funding.

- The Government has also decided to introduce passive Radio Frequency Identification(RFID) for electronic toll collection at the toll boards. This will remove bottlenecks atthe toll booths and ensure seamless movement of traffic.

- NHAI has taken up award of select highway projects to the private sector under anOperate, Maintain, and Transfer (OMT) concession. Till recently the tasks of tollcollection and highway maintenance were entrusted to tolling agents and subcontractors respectively.

- Under directive from NHAI most states have constituted high level committees undertheir Chief Secretaries for monitoring pre construction activities of NHAI projects. TheNHAI regional officer is the Member Secretary.

- Substantial financial powers have been delegated to the regional officers of NHAI forfacilitating speedy processing and approvals for acquisition of land.


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JNNURM: Fueling Urban RenewalThe Jahwaharlal Nehru National Urban Renewal Mission (JNNURM) was launched in 2005 tosupport and facilitate 65 mission cities to take up projects of urban renewal. The Government has

extended the seven year tenure of the mission by two years upto 31st March, 2014. All the 65 cities

under the Urban Infrastructure and Governance (UIG) component of the Mission have prepared

comprehensive City Development Plans which include investment plans with a focus on providing

city wide urban services such as water supply, sanitation, drainage, urban transport etc. As on

December, 2012 more than 91% of the seven year Additional Central Assistance (ACA) allocation of

Rs. 31,500 crore has been committed. A total of 551 projects at an approved cost of Rs. 61,772.9

crore for the 65 mission cities spread over 31 states/UTs has been sanctioned. Moreover a sum of

Rs. 20,145.2 crore has been released as ACA till 31st December, 2012.

The mission has also undertaken an exercise for assessing finances and credit worthiness of theUrban Local Bodies (ULBs) of the mission cities that have been charged with implementation of the

urban renewal projects. This is intended to trigger the process of leveraging debt for JNNURM

projects and provide a platform for the ULBs and financial institutions to engage in issues related to

project financing. As of now, 65 ULBs of the mission cities have been assigned final ratings.

Moreover, as a follow up surveillance rating has been initiated to affirm the rating and assess

improvements undertaken. So far 62 ULBs have undergone surveillance rating.

Bus Rapid Transit Systems (BRTS), providing speedy and better transport to passengers, have been

approved for Ahmedabad, Bhopal, Indore, Jaipur, Rajkot, Surat, Vijaywada, Vishakapatnam, Kolkata

and Pune-Pimpri-Chinchwad. These projects will cover total length of 467.4 kms at an estimated

cost of Rs. 5211.6 crore with admissible central finance assistance of Rs. 2373.4 crore. The scheme

also provides for purchase of 15260 buses at a total cost of Rs. 4727 crores. Till Novemebr, 2012

more than 12,620 model Intelligent Transport System (ITS) enabled low-floor and semi-low floor

buses have been delivered to the states/Union Territories.


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More than 900 Infra Projects Under PPP ModeMore than 900 projects with total project cost (TPC) of Rs. 5,43,045 crore in the infrastructure

sector have been initiated till December, 2012, as compared to over 600 projects with TPC of Rs.

3,33,083 crore as on 31st March, 2010. These projects are in various stages of implementation. This

seems to be a strong indication of the primacy given to the PPP mode as an effective tool for

bringing private sector efficiencies in creation of social and economic infrastructure and delivery of

public services. According to the World Bank report on Private Participation in Infrastructure

(PPI), India has been the top recipient of private investment since 2006 and has implemented 43

new PPP projects which have attached a total investment of US $ 20.7 billion in 2011. According to

the report, India alone accounted for almost half of the investment in new PPI projects

implemented in developing countries during the first semester of 2011. The report also mentions

that India continues to be the largest market for private participation in infrastructure in the

developing world. In the South Asian region, India attracted 98% of regional investment and

implemented 43 of the new 44 PPP projects taken up in the region.

This seems to strongly reflect the favour PPPs have found in India. The PPP Appraisal Committee

(PPP AC) constituted in January, 2006 has approved 307 central projects with TPC of Rs.

2,97,856.58 crores. These include 242 proposals of national highways, 29 in ports, 27 in housing, 5

in sports stadia, 2 in airports, one each in tourism and railways. The Government also supports

PPPs through its Viability Gap Funding (VGF) scheme under which 145 projects have been granted

approval with TPC of Rs. 80,203.28 crore and VGF support of Rs. 156,72.68 crores. Of this amount

VGF of Rs. 902.96 crore has been disbursed. Furthermore, 51 projects have been approved withIndia Infrastructure Project Development Fund (IIPDF) assistance of Rs. 64.51 crore of which Rs. 25

crore has been disbursed.


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India Calls for Additional Finance and Technology for Achieving SustainableDevelopment Goals

Though multilateral efforts on sustainable development and climate change have led to several

positive outcomes, there are still areas of concern where further work is needed to safeguard the

interests of developing countries. More importantly, equity, fair burden sharing, and equitable

access to global atmospheric resources have to be protected and addressed more adequately. With

the 12th Plans focus on environmental sustainability, India is on the right track. However, the

challenge for India is to make the key drivers and enablers of growth-be it infrastructure, the

transportation sector, housing, or sustainable agriculture-grow sustainably. This leads us to the

most vital issue of raising additional resources for meeting the need of economic growth with

greater environmental sustainability. India could do much more if new and additional finance and

technology were made available through the multilateral processes. There is a case for greater

cooperation, action, and innovation, provision of finance and technology for developing countries

and institutions and mechanism for capacity building.

Sustainable development and climate change was introduced as a chapter in the Economic Survey

last year for the first time. These topics remained headline news with extreme weather events both

at home and abroad. Efforts to arrive at a consensus on what to do at home and abroad gathered

momentum, even as they sailed through some rough waters and fickle seas in many respects.

Along with the national efforts in different sectors, India also recognizes that rural areas are equally

prone to stress and pressures from natural resource exploitation. In this context, schemes for rural

development and livelihood programmes are very relevant. A vast majority of the works under the

Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) are linked to land,

soil, and water. There are also programmes for non-timber forest produce-based livelihood,

promotion of organic and low-chemical agriculture, and increased soil health and fertility to sustain

agriculture-based livelihoods. These schemes help mobilize and develop capacities of community

institutions to utilize natural resources in a sustainable manner and their potential can be further

developed.

The year 2012 may arguably be considered a high water mark in the field of environment and

sustainable development initiative. The global community met at the UN Conference on sustainable

development that took place in Rio in June 2012, also marking the 20th Anniversary of the

landmark first Earth Summit held in 1992. The Conference reviewed the progress made, identifiedimplementation gaps, and assessed new and emerging challenges, which resulted in a political

outcome called the Future We Want.


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Agriculture Does Well in Output GrowthFood grains production in India has shown remarkable improvement in recent years. The

production of food grains in 2011-12 was at a record high of 259.32 million tones. Nevertheless the

XIth Five Year Plan (2007-12) witnessed an average annual growth of 3.6% in GDP from agriculture

and allied sector against a target of 4 per cent realized agriculture growth has been higher than the

average annual growth achieved during the IXth and Xth Plans despite drought and deficient

monsoon conditions.

The Survey finds that despite an all time high total food grain production during 2011-12, the

production of 2012-13 kharif crops is likely to be adversely affected by deficiencies in south west

monsoon and the resultant acreage losses. Output is expected to decline in all major crops.

However, yield levels significantly improved for cotton, pulses and coarse cereals during 2000-2012.

The Survey noted that as a result of central sector schemes for development and strengthening of

infrastructure facilities for seeds, there is an increased availability of certified quality seeds from

140.5 lakh quintals in 2005-06 to 328.6 lakh quintals in 2012-13. In hilly /remote areas of North

Eastern States, a Transport Subsidy on Movement of Seeds Schemes is in operation whereby grants-

in-aid of Rs, 12.6 crores was to be reimbursed. The Government has notified the new investment

policy of 2012 in the urea sector which will lead to increase in indigenous capacity and reduction in

imports. India has made considerable progress in developing irrigation infrastructure. However,

irrigation efficiency is low for both surface and ground water.

The live stock sector achieved an average growth rate of 4.8 per cent during XIth Plan. In 2011-12

the production of milk was estimated at 127.9 million tonnes, eggs at 66.45 billion, wool at 44.73

million Kg and meat at 5.51 million tonnes. A new scheme called National Dairy Plan Phase-I has

been launched in March, 2012 with the objectives of improving productivity of milch animals.

Poultry Venture Capital Fund Scheme is being implemented in capital subsidy mode since 1st April,

2011. Production of fish, both marine and inland has gone up from 5.6 million tonnes in 2000-01, to

8.7 million tonnes in 2011-12.

The Government continues to provide large and growing amount of subsidy on food grains for

distribution under the TPDS, other nutrition based welfare schemes and open market operations.India has improved its position in agriculture and food exports to 10th globally. Exports of

agriculture and allied products during 2011-12 accounted for 9.08 % of Indias total exports against

6.9% during 2010-11. The Standing Committee on Food, Consumer Affairs and Public distribution

has submitted its report on the National Food Security Bill to the Speaker Lok Sabha on 17th

January, 2013 which is being processed in consultation with concerned Ministries and States/ UTs.

Of the various challenges that the agriculture faces, the Survey finds that the country faces the stiff

challenge of feeding its growing population. According to the Survey, the country will have to invest


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heavily in farm research, rural infrastructure, provide better access to high value markets better

credit facility and input use. Wide Yield gaps among various crops exists across the country which

needs to be bridged by adopting technological and policy interventions. There are also challenges tomaximize agriculture income while adopting more sustainable agriculture strategy. The current

crop insurance system also needs to be further refined. A thrust on Horticulture products and

protein-rich items is required for enhancing per capita availability of food items as well as ensuring

nutritional security.

Focus On Curbing Imports Of Gold And Making Oil Prices More MarketDetermined To Contain CAD

Survey Lays Emphasis on FDI and FII InflowsCapital Inflows Sufficient to Finance Current Account Deficit

The Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram in

the Lok Sabha today has stated that as the room to increase exports in short run is limited, the main

focus has to be on curbing imports, mainly by making oil prices more market determine and

curbing imports of gold to contain current account deficit. At the same time, the Survey says, further

measures to ease the inflow of remittances and steps to diversify software exports could help

reduce financing needs. Greater emphasis on FDI including opening of sectors further can help

increase quantum of safe-financing. Foreign Institutional Investors (FIIs) flows need to be targeted

towards long-term rupee instruments so as to minimize the reversal of capital during risk-off

phases. Finally, the Survey observes, external commercial borrowing needs to be monitored

carefully so that entities without access to foreign exchange revenues do not leave significant

exposures unhedged.

The Survey observes that widening trade deficit and Current Account Deficit (CAD) crossing 4% of

GDP in 2011-12 and the first half of 2012-13 have been matters of concern. The Survey further says

that in recent years, net invisible balance reduced the need for financing while capital inflows were

sufficient to finance the CAD. The Survey notes that in the current fiscal the growth in invisible is

insufficient to narrow the growing trade deficit besides the CAD financed by volatile capitals flows

has led to financial fragility and is reflected in rupee exchange rate volatility.


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Gross Tax Revenue in April-December 2012 Grows by 15% OverCorresponding of Previous Fiscal


the Lok Sabha today states that the Gross Tax Revenue in April-December, 2012 has grown year-on-

year by 15% to reach Rs. 6,83,345 crore. This was higher than that of 12.2% in April-December

2011. It however, falls significantly short of the growth envisaged by the budget estimates of 2012-

13 (Rs. 10,77,612 crore).

The Survey points out that growth in April-December, 2012 comprises of 17.4% in union excise

duties, 6% in customs, 22.5% in personal income tax, 33% in service tax and 10.6% in corporate

income tax. In terms of the implied year-on-year growth envisaged by BE 2012-13 over provisional

actuals of 2011-12, there is a slippage in the first nine months of current fiscal in corporate income

tax by 4.9 percentage points, customs by 18.9 percentage points and central excise by 16percentage points. There is overperformance in service tax collections by 5.9 percentage points and

personal income tax by 7.6 percentage points with an overall slippage of 6 percentage points.

The Survey notes that slippage in tax revenue collection could be lowered with some additional

efforts in the last quarter based on the observed collection in the last quarter of previous year.

Foreign Exchange Reserves Remain SteadyThe Economic Survey 2012-13 presented by the Union Finance Minister, Shri P. Chidambaram inthe Lok Sabha today has stated that the Foreign Exchange Reserves in the current fiscal, on month-

on-month basis remained in the range of US $ 286.0 billion (at end-May 2012) to US $ 295.6 billion

(at end-December 2012).

By end of December 2012, reserves stood at US $ 295.6 billion, indicating a marginal increase of US

$ 1.2 billion from US $ 294.4 billion in March, 2012. At this level, reserves provided about seven

months of import cover, the Survey observes.

Indias foreign exchange reserves comprise foreign currency assets (FCA), gold , special drawing

rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF). The

level of foreign exchange reserves is largely the outcome of the Reserve Bank of India (RBI)intervention in the foreign exchange market to smoothen exchange rate volatility and valuation

changes due to movement of the US dollar against other major currencies of the world.


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Reprioritisation of Expenditure from Non-Plan to Plan Critical to Meet 12thPlan Outlay


the Lok Sabha today observed that repriorisation of expenditure from non-Plan to Plan would be

critical in meeting the proposed 12th Plan outlay. The total non-Plan expenditure as per Budget

Estimates for 2012-13 is placed at Rs. 9,69,900 crore while the Plan expenditure has been pegged at

Rs. 5,21,025 crore.

The non-Plan expenditure during April-December 2012 has been Rs. 6,95,233 crore as against

6,19,457 crore in April-December 2011 registering an increase of 12.2% the Plan expenditure on

the other hand during April-December 2012 increased by 6.9% to Rs. 2,95,890 crore from Rs.

2,76,904 crore in April-December 2011.

The Plan outlay comprises Gross Budgetary Support (GBS) for Plan (Central Plan plus central

assistance to States/Union Territories and internal & extra budgetary resources of central public

enterprises).

Controlling Expenditure on Subsidies Crucial; Need to Raise Diesel and LPGPrices in Line with Global Markets


the Lok Sabha today called for checking expenditure on subsidies. The Survey says , Controlling theexpenditure on subsidies will be crucial. The domestic prices of petroleum products, particularly

diesel and liquefied petroleum gas (LPG) need to be raised in line with the prices prevailing in the

international markets.

The Survey states that a beginning has already been made with the decision in September, 2012 to

raise the prices of diesel and again in January, 2013 to allow oil marketing companies to increase

prices in small increments at regular intervals. The number of subsidised gas cylinders has also

been capped at nine.

The Economic Survey further emphasizes that efforts will have to be made to contain subsidies

through better targeting and for reducing leakages involved in their delivery. One such initiative isDirect Benefit Transfer (DBT) Scheme.

The high level of crude oil prices also has a significant bearing on the level of fertilizers subsidies as

it is not only a key input as feedstock but also because of inadequate pass through in urea prices.

The Government has been calibrating pricing policies to address the issue of burgeoning fertilizer

subsidies. One of the important decisions taken was to fix per tonne subsidy on key non-

nitrogenous fertilizers, thereby limiting the increasing the subsidy outgo to the extent of increase in

consumption.


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The Survey underlines the need for according priority to food subsidy in view of the under

consumption of basic food by the poor and the extent of malnutrition in the country. Governmenthas sought to correct this through National Food Security Act, though concerns have been

expressed that this will lead to a higher subsidy outgo. However, it is a part of the challenge of

prioritization to provide for this basic need even as other items of expenditure are minimised, the

Survey advocates.

Fiscal Outcome Indicates Significant Improvement in 2012-13Continuing Fiscal Consolidation Critical for Higher Growth and Price Stabliity:

Economic Survey


the Lok Sabha today emphasizes that the fiscal outcome of Central Government in 2012-13 so far

indicates a significant improvement over 2011-12. The fiscal position of the States has continued to

progress with fiscal deficit budgeted at 2.1% of gross domestic product (GDP), the Survey added.

The fiscal outcome of 2011-12 was affected by macro economic developments of slow down in

growth, higher global crude oil prices and sluggish financial market conditions for effecting the

budgeted disinvestments programme. The Survey stresses that these developments continued

through the first half of the current year. The Government then pressed harder for reforms and an

initial step was to set up the Kelkar Committee. Following its recommendations, the Government

unveiled a revised fiscal consolidation roadmap.

The Economic Survey has called for staying on the path of indicated fiscal consolidation. This, it

says, is critical to sustaining the desirable macro-economic outcomes not only in terms of higher

growth in real GDP and lower inflation, but also in easing the financing of the widening current

account deficit (CAD), for which Indias sovereign credit rating is important. The Survey also

emphasizes widening tax base and privatization of expenditure as key factors in effecting the

desired reduction in the Central Government fiscal deficit over the medium term and in reducing

the key risks in fiscal marksmanship (different between actual outcomes and budgetary estimatesas a proportion of GDP). The Survey underlines that addressing the key fiscal risk of petroleum

subsidies is critical in better fiscal marksmanship. With recent reforms in diesel prices and efforts

at expenditure reprioritization, the medium term fiscal consolidation plan is credible and could yet

again yield macro economic dividends in terms of higher growth and price stability, the Survey

notes.


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Government to Raise Rs 40,000 Crore Through DisinvestmentThe Central Public Sector Enterprises (CPSEs) are an important constituent industry. There were

altogether 260 CPSEs under the Administrative control of various Ministries/Departments as on

March 31, 2012. Of these, 225 were in operation and 35 under construction. The share of industrial

CPSEs in the total investment in CPSEs in terms of gross block, stood at 77.46 per cent during the

year. The CPSEs in the mining sector registered the highest increase in net profit (29.45 per cent) in

2011-12. CPSEs in manufacturing sector recorded a decline of 22.65 per cent in net profit in 2011-

12 despite 27.73 per cent increase in their turnover. The electricity sector recorded growth of 16

per cent turnover and 13.42 per cent in profit.

The Government has set a target for raising Rs 40,000 crore by way of disinvestment in various

CPSEs during 2011-12 and raised Rs 13,854 crore, which included disinvestment by way of offerfor sale (OFS) in Oil and Natural Gas Commission (ONGC) amounting to Rs 12,749.50 crore. The

disinvestment target in Budget 2012-13 has been set at Rs 30,000 crore.

Governments Key Initiatives to Boost ManufacturingThe Government has taken several initiatives to uplift overall business sentiment, boost

investment, strengthen industry and in particular the manufacturing sector in the country. The

Twelfth Five Year Plan document lays down broad strategies for spurring industrial growth. It

recommends sector specific measures covering micro, small, medium and large industries in theformal as well as informal sector. Some of major initiatives that can change the manufacturing

landscape of the country are the National Manufacturing Policy (NMP), implementation of the Delhi

Mumbai Industrial Corridor (DMIC) Project and reforms to promote foreign direct investment

(FDI)and an-e-Biz project.

The National Manufacturing Policy was approved by the Government in October, 2011. The major

objectives of the policy are enhancing the share of manufacturing in gross domestic product (GDP)

to 25 per cent and creating an additional 100 million jobs over a decade or so. The NMP provides

for promotion of clusters and aggregation, especially through the creation of National Investment

and Manufacturing Zones (NIMZs). Out of twelve NIMZs so far announced, eight are along the DMIC.

Besides, four other NIMZs have been given in-principle approval (i) Nagpur in Maharashtra, (ii)

Tumkur in Karnataka, (iii) Chittoor district in Andhra Pradesh and (iv) Medak district in Andhra

Pradesh.

Industrial development initiatives under DMIC project presently cover eight industrial cities that

are proposed to be developed along the railway corridor. The Master Planning for the investment

regions and industrial areas taken up initially are to be developed as new cities in Gujarat, Madhya


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Pradesh, Haryana, Rajasthan and Maharashtra have been completed and master planning in Uattar

Pradesh has started.

In the policy reform process, the FDI policy is being progressively liberalized on an ongoing basis in

order to allow FDI in more industries under the automatic route. Some recent changes in FDI policy,

besides consolidation of the policy into a single document include FDI in multi-brand retail trading

up to 51 per cent, subject to specified conditions; increasing FDI limit to 100per cent in single-

brand retail trading; FDI up to 49 per cent in civil aviation and power exchanges; FDI up to 49 per

cent in broadcasting sector under the automatic route and FDI above 49 per cent and up to 74 per

cent under the govt route both for teleports and mobile TV.

The govt has announced the setting up of Invest India a joint-venture company between the

Department of Industrial Policy and Promotion and FICCI, as a not-for-profit, single window

facilitator for prospective overseas investors and to act as a structured mechanism to attractinvestment. The objectives of setting up of the e-Biz portal are to provide a number of services to

business users, covering the entire life cycle of their operation. The project aims at enhancing

Indias business competitiveness through a service oriented, event-driven G2B interaction.

Industrial Growth Expected to ImproveThe index of industrial production (IIP) with 2004-05 as base is the leading indicator for industrial

performance in the country. In compilation on a monthly basis, the current IIP series-based on 399

products/product groups is aggregated into three broad groups of mining, manufacturing andelectricity. The mining sector production has contracted in the last six quarters. The contraction in

the current years was largely because of decline in natural gas and crude petroleum output. There

was, however, a sharp pick-up in growth in October 2012 with manufacturing growth improving to

9.8 per cent, the highest recorded since June, 2011.

In terms of the use-based classification of industries, the capital goods sector sustained negative

growth in the last six quarters. Growth in the consumer durable sector continued to fluctuate,

turning negative in Q4 of 2011-12, 0.7 per cent in Q2 and 3.2 per cent in Q3 of 2012-13. The growth

of consumer durables at 16.9 per cent was the highest in the last 20 months.

The moderation in industrial growth, particularly in the manufacturing sector, is largely attributedto sluggish growth of investment, squeezed margins of the corporate sector, deceleration in the rate

of growth of credit flows and the fragile global economic recovery.

The Gross Capital Formation (GCF) in the industrial sector comprising mining, manufacturing,

electricity and construction recorded an average growth of 13.02 per cent during 2004-05 to 2011-

12. Growth turned negative during 2008-09 and again in 2011-12.


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The decline in overall share of GCF in industry in the total GCF for the economy and overall negative

annual growth during 2008-09 and 2011-12 was largely due to a negative growth in GCF in the

registered and unregistered manufacturing sector.

The sluggish industrial performance also affected corporate performance. The rate of growth of

sales of the corporate sector particularly in respect of listed manufacturing companies for the

private sector declined from an average of 28.8 per cent in Q1 of 2010-11 to 11.4 per cent in Q2 of

2012-13. Together with a deceleration in the rate of growth of sales, the ratio of net profit to sales

also moderated.

As industrial production remained sluggish in 2011-12 and the moderation continued during the

current financial year. Infrastructure and energy constraints, decline in demand for Indias exports

and fragile recovery in investment are the risk factors. The latest seasonally adjusted annualized

growth of industrial output indicate that the growth of the sector could remain moderately positiveat around 3 per cent for the current year.

Apart from weak investment climate, industrial sector performance remained subdued due to

infrastructure bottlenecks. Industrial growth rate moderated due to sharp decline in output of

natural gas, subdued performance of the coal sector and its resultant impact on thermal power

generation, and slow pace of project implementation in rail, road and port sectors.

Government Initiatives Generate OptimismThe policy initiatives taken by the government in the recent months have made the business

sentiment buoyant and have generated some optimism. The latest seasonally adjusted annualized

growth of industrial output indicate that the growth of the sector could remain positive at around 3

per cent for the current year. Industrial production was moderate in 2011-12 and continued during

the current financial year. Industrial growth still remains vulnerable to several domestic factors

and external shocks. Infrastructure and energy constraints, decline in demand for Indias exports,

and fragile recovery in investment are the risk factors.

In the short run, revival of investment in industry and key infrastructure sectors is the key

challenge. Industrial sector has been hit hard by the deceleration in investment for the second

successive year. As per the latest first revised estimates of GDP gross capital formation in themanufacturing sector in 2011-12 had declined by 18.8 per cent as compared to 2010-11. Lower

foreign direct investment inflows in key industry and infrastructure sectors during April-October

2012 was $ 6.19 billion as against the inflow of $ 18.66 billion during the same period of the

previous year. This has further constrained investment in these sectors.

Investment intentions indicated in the industrial entrepreneur memorandum (IEMs) filed, which

are lead indicators of likely investment flows to industry, also declined in 2011 and 2012.


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Notwithstanding a marginal pickup in the gross bank credit deployment into industrial sector in

recent months, year on year increase in gross bank credit deployment by end of December 2012

has been 13.8 per cent as compared to 19.8 per cent a year ago.

Visible Moderation in WPI Inflation while Food Inflation Remains HighThe headline WPI inflation has remained muted in the current financial year and declined to a three

year low of 6.62 per cent in January 2013 backed by moderation in the non food manufacturing

sector. Headline WPI inflation decelerated to 7.55 per cent in the first nine months of 2012-13. Ithad averaged 9.56 per cent in 2010-11 and 8.94 per cent in 2011-2012.

WPI inflation has been declining across commodity groups. Against 72 commodities, accounting for

a weight of 13.8 per cent reporting inflation of 20 per cent or above in Q2 of 2011-12, the number

declined to 29 commodities with a weight of 5.5 per cent in Q2 of 2012-13.

Relative importance of different commodity groups contributing to this persistent inflation,

however, changed over time. The persistently elevated prices for animal products (eggs, meat and

fish), the rise in the prices of cereals and vegetables, along with the increase in international prices

of fertilizers (non-urea) and the increase in administered prices of diesel have contributed to

inflation in differing degrees over time. Unlike last year when the food price inflation was mainlydriven by higher protein food items, this year the pressure has been mounting in cereals. On the

other hand milk and other protein items have shown decline.

Food inflation comprising primary food articles and manufactures food products at 9.05 per cent in

Q3 of 2012-13 was significantly higher than the 5.30 per cent in Q4 of 2011-12. Non-food non-

manufacturing inflation did moderate over the current year, but remains high, in the double digits,

largely because of higher inflation for oilseeds and the commodities in the group fuel and power.

Core inflation which corresponds to inflation for non-food manufactured products, and is a central

focus for the Reserve Bank of India (RBI), however, continued to show moderation from its peak in

Q3 of 2011-12. It has declined from 8.35 per cent in November 2011 to 4.24 per cent in December,2012. Deceleration in inflation was witnessed across all major segments of manufacturing.

However, inflation in machinery and transport equipment has generally remained low Apart from

monetary measures taken by the RBI, softening of international and domestic prices of metals,

chemicals and textile products also contributed to the moderation in core inflation.


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Measures Taken by Government to Protect Consumers from Price RiseThe Government has undertaken various measures to insulate the vulnerable sections ofsociety from price rise.

The central issue prices(CIP) for rice (at Rs. 5.65 per kg for below poverty line(BPL) andRs. 3 per kg for Antodaya Anna Yojana (AAY) families) and wheat (at Rs. 4.15 per kg for BPLand Rs. 2 per kg for AAA families) have been maintained since 2002.

Under the targeted PDS(TPDS), allocation of foodgrains is being made to 6.52 crore AAYand BPL families at 35kg per family per month at a highly CIP.

The government has allocated rice and wheat under the Open Market SalesScheme(OMSS).

The scheme for imports of pulses which envisaged imports for distribution of BPLhouseholds through the PDS with a subsidy of Rs. 10 per kg operated from November 2008to June 2012. The government has decided to implement a varied form with a subsidy

element of Rs. 20 per kg per month for BPL cardholders for the residual part of the currentyear.

The Scheme for Distribution of Subsidized Imported Edible Oils has been implementedsince 2008-09 through state/union territory(UT) governments for distribution of 1 litre perration card per month with a central subsidy of Rs. 15 per kg. The scheme has beenextended up to 30 September 2013.

Fiscal measures

Import duties for wheat, onions, pulses and crude palmolein were reduced to zero and 7.5per cent for refined vegetable and hydrogenated oils respectively.

Duty-free import of white/raw sugar was extended up to 30 June 2012. Presently the

import duty has been fixed at 10 per cent.

Administrative Measures

Ban on exports of onions was imposed for short periods of time wheneverrequired. Exports of onions were calibrated through the mechanism of minimum exportprices(MEP).

Future trading in rice, urad, tur, guar, gum and guar seed was suspended. Exports of edible oils (except coconut oil and forest-based oil) and edible oils in blended

consumer packs up to 5kg with a capacity of 20,000 tons per annum and pulses (exceptKabuli chana and organic pulses and lentils up to a maximum of 10,000 tones per annum)

were banned. Stock limits were imposed from time to time in the case of select essential commoditiessuch as pulses, edible oil, and edible oilseeds and in respect of paddy and rice up to 30November 2013.


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Budgetary and other measures

The government launched a National Mission for Protein Supplements in 2001-12 with anallocation of Rs. 300 crore. To broaden the scope of production of fish to coastalaquaculture, apart from fresh water aquaculture, the outlay in 2012-13 was stepped up toRs. 500 crore. Recently the government permitted FDI in multibrand retail trading. Thiswill help consumers and farmers as it will improve the selling and purchasing facilities.

Monetary measures

The RBI had also taken suitable steps to contain inflation with 13 consecutive increases by375 basis points(bps) in policy rates from March 2010 to October 2011.

Headline WPI Inflation May Decline Between 6.2 to 6.6. Per Cent in March2013

With moderation in non food manufacturing sector and global commodity prices, the headline WPI

inflation may decline between 6.2 to 6.6. per cent in March 2013. Inflation has remained muted in

the current financial year and declined to a three year low of 6.62 per cent in January 2013 . Unlike

last year when the food price inflation was mainly driven by higher protein food items, this year the

pressure has been mounting in cereals. On the other hand milk and other protein items have shown

a decline. The recent increase in onion prices in January 2012 and revision in diesel prices may put

some pressure on headline inflation. However, inflation is expected to continue the moderating

trend.

Inflation has eased in almost all major advanced and emerging market economies in the current

year. The positive effect of continuous policy easing by the major advanced and developing

countries could pose a higher risk to inflation expectations. However, in the short run, given weak

growth sentiments, the impact of policy easing may not lead to a surge in inflation and inflation

expectations may remain anchored around current target inflation rates.

As per the World Banks global economic prospects, January 2013, except for metals, most globalcommodity prices are expected to decline further in 2013 and 2014. The impact of benign

inflationary expectations internationally will have a moderating impact on domestic prices. The

RBIs monetary policy stance has continued to focus on the twin objectives of containing inflation

and facilitating growth. Increasing risks to growth from external as well as domestic sources and

tight monetary policy in face of persistent inflationary pressures have contributed to a sharper

slowdown of the Economy than anticipated. There has been some moderation in inflation in Q3 of

2012-13 and with the expected fiscal consolidation the current macroeconomic situation creates


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room for a more accommodative monetary policy.


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Government Takes Several Initiatives to Achieve Greater Financial InclusionGovernment has taken number of steps to expand the reach of organized financial services tothe door steps of the common man. Particular attention has been paid to the rural areas where a

large segment of the society was not having access to organized banking. Some of the steps takenfor financial inclusion are as below:-

Micro-Finance: Self Help Group-Bank Linkage ProgrammeThe Self-Help Group (SHG)-Bank Linkage Programme has emerged as the major micro-

finance programme in the country. It is being implemented by commercial banks, regionalruralbanks(RRBs), and cooperative banks. Under the SHG-Bank Linkage Programme, as on 31March 2012, 79.60 lakh SHG-held savings bank accounts with total savings of Rs. 6,551 crore were

in operation. By November 2012 another 2.14 lakh SHGs had come under the ambit ofthe programme, taking the cumulative number of savings-linked groups to 81.74 Lakh.

Extension of Swabhimaan SchemeUnder the Swabhimaan financial inclusion campaign, over 74,000 habitations with population in

excess of 2,000 had been provided banking facilities by March 2012, using various models andtechnologies including branchless banking through business correspondents(BCs). Swabhimaan has been extended to habitations with population more than 1,000 in the

North-Eastern and hilly states and population more than1,600 in the plains areas as per census2001. 10,450 have been provided banking facilities by end of December, 2012. This will extend thereach of banks to all habitations above a threshold population.

Setting up of Ultra Small BranchesConsidering the need for close supervision and monitoring of the business correspondent

agents(BCAs) by respective banks and in order to ensure that a range of banking services areavailable to the residents of such villages, ultra small branches (USBs) are being set up in all villagescovered through BCAs under financial inclusion. These USBs will comprise a small area of 100-200sq. feet where the officer designated by the bank will be available with a laptop on pre-determined

days. A total of over 40,000 USBs have so far been set up in the country.

Roll out of Direct Benefit TransferThe Government of India has decided to introduce a Direct Benefit Transfer (DBT) scheme

with effect from 1 January, 2013. To begin with, benefits under 26 schemes will directly betransferred into the bank accounts of beneficiaries in 43 identified districts across respective statesand union territories (UT).


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Agriculture CreditAs against the target of Rs. 4,75,000 crore fixed for 2011-12, Rs. 5,11,029.09 crore wasdisbursed to the agricultural sector, thereby exceeding the target by 8 per cent.

Kisan Credit Card SchemeThe Kisan Credit Card(KCC) has been an important initiative for universal access of farmers

to institutional credit. The number of operative KCCs issued by the cooperative banks and RRBs ason 31 August, 2012 was 406 Lakhs against which outstanding loan amount was Rs.1,12,334 crores.

RS. 12,517 Crore Capital to be Infused in PSBst to Augment their Tier-1Capital

Government has proposed to infuse an amount of Rs. 12,517 crore in Public

Sector Banks(PSBs) to augment their Tier-1 capital in FY-2012-13. A sum of Rs. 12,000 crore was

infused during 2011-12 to enable them to maintain a minimum Tier-1 CRAR of 8 per cent.

Performance of Indian banks during the year 2011-12 was conditioned to a large extent byfragile recovery of global financial markets as well as a challenging operational environment on thedomestic front. The operating performance of the Scheduled Commercial Banks(SCBs) can besummed up as follows:-

Public Sector Banks(PSBs) had a dominant share and accounted for 72 percent of the totalincome of the SCBs and 72.8 per cent of aggregate assets.

In 2011-12, there was a sharp increase in the expenditure on provisioning andcontingencies. As percentage of PSB assets, the provisioning expenditure increased from1.04 per cent in 2010-11 to 1.11 per cent in 2011-12.

PSBs were able to increase their interest spread from 2.55 per cent in 2010-11 to 2.59 percent in 2011-12.

Net profit as percentage of assets remained sticky at 0.98 per cent in 2010-11 and 2011-12.

The Capital to Risk-Weighted Assets Ratio (CRAR) remained well above the RBIsstipulated 9 per cent for the system as a whole as well as for all bank groups during 2011-12, indicating that Indian banks remained well-capitalized.

Overall NPAs of the Banking sector increased from 2.36 per cent of total credit advancedin March, 2011 to 3.57 per cent of total credit advanced in September 2012.


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Economic Survey Acknowledges Benefits of Market DiversificationThe Economic Survey presented by the Finance Minister, Shri P. Chidambaram in the Parliamenttoday expressed satisfaction over the strategy of market diversification There has been significant

market diversification in Indias trade. Region wise, Indias exports to Europe and America have

declined to 18.7 per cent and 19.5 percent respectively in 2012-13 from 25.9 per cent and 24.7 per

cent in 2000-01. On the other hand Export to Asia and Africa rose to 50.4 per cent and 9.6 per cent

respectively from 37.4 per cent and 5.3 per cent respectively during the same period. There was a

noticeable rise in the share of West Asia GCC (Gulf Cooperation Council) countries from 14.9

percent in 2011-12 to 17.7 percent in 2012-13 (April- November) said the Survey. However, the

Survey noted thatin terms of product diversification a lot more is needs to be done.

The Survey also noted the impact of exchange rate changes on export growth. It said that while

Export growth in dollar terms was negative at - 4.9 in 2012-13 (April-January), it was positive inrupee terms at 9.1 per cent. Though, here too, there was a deceleration from the 28.3 per cent in

2011-12 (full year).

The trade deficit of USD 167.2 billion for 2012-13 (April-January) was 7.9 per cent higher than the

USD 154.9 billion during the same period in 2011-12. The survey attributes this to moderate export

growth and high import growth, particularly in petroleum, oil and lubricants (POL) products.

Demand contraction due to global economic conditions impacted India and export suffered.

After touching the high point of 56.5 per cent growth in July 2011, India s export growth started

decorating with a sudden fall to single digits in November 2011 and then to negative territory in

March 2012. Monthly export growth rates in 2012-13 (April- December) were negative except inApril 2012. The survey notes the marginal revival to positive territory i.e. growth of export at 0.8

per cent in January 2013. The Survey said that the Indias exports to EU and China have been more

negative during the recent slowdown then in 2009-10, while the performance to USA has been

better for most of the sectors except gems and jewellery.


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Indias Social Safety Nets Successfully Weather Global Economic and FinancialCrisis; Social Sector Spending on Continuous Increase; Direct Benefit Transfer

Scheme Successfully Implemented in States of Jharkhand, Tripura andMaharashtra

India with its focus on inclusive development and timely interventions has been able to ward off the

ills of global economic and financial crisis better than many other countries. The global recession

and the slow down have squeezed the fiscal space for most countries. However, Indias social sector

spending has seen a continuous increase. According to Survey, the country contines to work on

XIIth Plan initiative for Faster, More Inclusive and More Sustainable Growth and strives for

targeted policy for the poor with minimal leakages. To achieve greater inclusive development, the

share of Central Govt. expenditure (Plan and Non-Plan) on Social Service and Rural Development

increased from 14.8% in 2007-08 to 17.4% in 2012-13(BE) 2007-08 to 25.1% in 2012-13.

Survey says that under Phase 2 of Unique Identification Authority of India (UIAI), 40 crores

residence are to be enrolled before end 2014. As of December 2012, 25 crores Aadhaars had been

generated and approximately 20.00 crore aadhaars letters has been dispatched. Pilots on Direct

benefit transfers (DBT) have also been successfully conducted in the States of Jharkhand, Tripura

and Maharashra to transfer monetary benefits related to social welfare schemes. Survey says that

about 10.5 crore children benefitted under the mid-day meals programme during 2011-12.

According to Survey, through Bharat Nirman Programme, the country strives to achieve a higher

degree of rural- urban integration and an even pattern of growth and opportunities for the poor

and disadvantaged. During 2012-13 as against of physical target of 30.10 lakhs houses, 25.35 lakhshouses were sanctioned and 13.88 lakhs had been constructed as on 31st December, 2012. The Unit

assistance provided under the Indira Awas Yojana (IAY) is being revised w.e.f 1st April, 2013 from

Rs.45,000 to Rs.70,000/ in plain areas and from Rs.48,500/ to Rs.75,000/ in hilly/ difficult

areas/integrated action plan districts. 82 left wing extremisms affected districts have been made

eligible for this higher rate of unit assistance. Under the Pradhan Mantri Gram Sarak Yojna

(PMGSY), a sum of Rs.l02658 to have been released to the States and about Rs. 96939 crore spent

by December, 2012. A total of 3,63,652 Km. road length connecting nearly 90,000 habitations has

been completed. About 74% of rural habitations are fully covered under the provision of the safe

drinking water.

Quoting the latest Human Development Report 2011, the Survey finds that the Human

Development Index for India ws 0.547 in 2011 within overall global ranking of 134. ( Out of 187

countries) compared to 119 (out of 169 countries) in HDR 2010. Survey points out that the India is

ranked 129 in terms of the gender inequality index(GII) which highlights the loss in achievement

due to gender disparities in the areas of reproductive health, empowerment and labour force

participation. The Survey mentions that the infant mortality rate (IMR) which was 58 per thousand

in the year 2005 has fallen to 44 in the year 2011. The Survey highlights that not only the inequality

in India is lower than many other developing countries


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The Survey finds that the last decade 2000-2010 witnessed an employment growth of 1.6% per

annum. Quoting NSSO Survey 2009-10 the survey says that the modest employment growth in

second half of the decade was on account of a lower Labour Force Participation Rate (LFPR). Thegrowth of those in labour force declined possibly on account of greater number of persons opting

for education /skill development. The unemployment rate infact decline between 2004-05 and

2009-10 both in rural and urban areas implying that relatively large proportions of persons who

will willing to work, were actually employed.

The Survey finds out that while some states have performed well in terms of growth indicators,

they have performed poorly in terms of poverty, rural-urban disparity, unemployment, education,

health and financial inclusion. According to Survey, Bihar has the highest decadal (2001-11) growth

rate of population(25%) while Kerala has the lowest rate (4.9%). In 2011, Kerala has the highest

sex ratio ( 1084), while Haryana is at the bottom (877). In terms of growth Bihar is the best

performer (16.7%), Rajasthan is the worst (5.4%). Highest Poverty Head Count Ratio (HCR) exists

in Bihar (53.5) while lowest is in Himachal Pradesh (9.5%). The unemployment rate is the lowest in

Gujarat (18) and highest in Kerala and Bihar(73) in Urban areas and the lowest in Rajasthan (4) and

again highest in Kerala (75) in rural areas. Kerala is the best performer in terms of life expectancy

at birth whereas Assam is the worst performer in both males and females. Based on above findings,

the Surveys calls for a rethink on the criteria used for devolution of funds to states.

The Government is following a focused approach through various flagship schemes in the areas of

poverty alleviations and employment generation. The Survey points out that under MNREGA, out of

total outlay of Rs.33,000 crores approved for 2012-13, Rs.25,894 crores has been released. About

4.39 crores household have been provided employment of 156 crores person days. Approximately,168.46 lakhs Swarozjaris have been assisted with Bank credit and subsidy under Aajeevika (

SGSY/NRLM). Out of Annual Budgetary Provision of Rs.838 crores for the Swaran Jayanti, Shahri

Rozgar Yojana (SJSRY) for the year 2012-13, Rs.516.77 crores have been released and a more than

4.07

summary of economic survey 2012-13

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