Budget 2012: Economic Survey to define challenges for Pranab.

The Economic Survey to be tabled shortly is likely to put forward challenges that finance minister Pranab Mukherjee faces ahead of the budget announcement on 16 March. A slow growth, rising expenditure and government borrowing, stubborn inflation and pending fuel price hike, call for a tough budget. However, political compulsions may not permit him to do so.

The economic Survey to be published  is actually the road ahead for the economy. It is a report card on the performance of the economy and works as guidebook for the budget estimates for the next year.

This is the story so far, according to the ministry of finance and Reserve Bank of India monthly data to give you a heads up ahead of the formal release of the survey.

• The overall growth of gross domestic product or GDP at factor, according to government advanced estimates, is likely to be 6.9 per cent in 2011-12 as compared to the revised growth of 8.4 per cent during 2010-11.

• India's industrial output in January grew at its fastest pace in 7 months by 6.8 per cent. The index for industrial output for IIP was 1.8 per cent in December 2011. While government said that the growth was a positive signal, the industry felt otherwise. The general consensus was that the numbers were too volatile to really draw a serious conclusion.

• In further evidence of a slowing economy, the core sector grew by a mere 0.5 per cent in January, mainly because of slackening output of crude oil, steel, natural gas and petroleum refinery products. The eight core industries, which also include coal, cement, fertilisers and electricity, had recorded a growth rate of 6.4 per cent in the corresponding period a year ago. In December 2011, core sector growth came in at 3.1 per cent, against 6.3 per cent in the year-ago period. Between April 2011 and January2012, growth was lower at 4.1 per cent compared to 5.7 per cent in the corresponding period of 2010-11 in wake of deceleration in investment.

• Broad money (M3) (up to January 27, 2012) increased by 10.2 per cent as compared to 11.7 per cent during the corresponding period of the last year. M3 is the money supply and the growth in this determines the inflation in an economy. The year-on-year growth, as on January 27, 2012 was 14.4 per cent as compared to 16.5 per cent last year. However, this does not clearly indicate that RBI needs to start cutting rates, experts say.

• A widening trade deficit will likely worsen India's current account deficit and further weaken the rupee.

• Merchandise exports grew an annual 4.3 per cent to $24.6 billion in February 2012, while imports grew 20.6 per cent to $39.8 billion. The trade deficit widened to $15.2 billion during the month, from $14.8 billion in January. Trade deficit during 2011-12 (April- December) amounted to US$ 133.2 billion, as compared with US$ 96.2 billion during April- December 2010. This is likely to put pressure on the current account deficit, the difference between exports and imports.

• Foreign Currency Assets stood at US$ 259.2 billion as of 10 February 2012 and same as at end of January 2012. This is lower than US$ 270.1 billion at end January 2011.

• Gross tax revenue is at 64 per cent of budget estimates during April-December 2011 and has increased by 12 per cent in comparison to the corresponding period in the previous year; with service tax, custom duties and taxes on income being the main contributors registering growth of 37 per cent, 15 per cent and 14 per cent respectively over the previous year. However, the government is expected to fall short of targets.

• As a proportion of budget estimates, India’s fiscal deficit had already touched 100 per cent in January 2012. This means the government has already incurred excess expenditure over revenue to what was estimated in last year’s budget. The government has hiked the market borrowing target for the current fiscal to Rs 4.35 lakh crore, from the budgeted Rs 3.43 lakh crore. This is equivalent to the fiscal deficit.

• The cumulative rainfall received for the country as a whole, during the winter season, 2012 (January 1 - February 28), has been above normal as on 2 February 2012. Food grains (rice and wheat) stocks held by Food Corporation of India, a state-owned warehouse, and state agencies were 54.72 million tonnes as on December 1, 2011.

Source : profit.ndtv.com