fe-ICRA SNAPSHOT
KEY ISSUES
• Fiscal consolidation: To contain deficit, efforts required to widen the tax base, improve tax administration on the revenue side and reduce non-plan spend on the expenditure side
• Tax reforms: Tax reforms must continue to strive for widening the tax base (through removal of exemptions), reduction in the number of tax levies (thus, encouraging compliance) and expansion in coverage (expanding coverage of service tax and bringing more people under the tax net etc)
• Free up resources from unproductive use: Need to augment declining public investment in agriculture (declining since the Fifth Plan) by freeing up resources from unproductive use
• Tackle declining employment growth in rural sector: Augment public investment and oversee the implementation of the employment guarantee scheme
• Ensure efficient deployment of existing resources: Set up monitoring mechanisms to oversee effective deployment of resources
• Increase social sector outlay: Especially on education and health
• Make interest rate on small savings and provident funds reflect market risk
• Move faster on privatisation
| STATE OF THE ECONOMY |
| FY2005 (%) | FY2004 (%) |
| REAL ECONOMY | | |
| Real GDP growth | 6.9 | 8.5 |
| Agriculture growth | 1.1 | 9.6 |
| Industrial growth | 8.9 | 6.9 |
| Services | 7.1 | 7.1 |
| Core infrastructure * | 5.4 | 5.8 |
| Index of industrial production* | 8.4 | 6.6 |
| CENTRAL GOVERNMENT FINANCES | | |
| Fiscal deficit (% of BE April-Dec) | 65.7 | 60.2 |
| Primary deficit (% of BE April-Dec) | 130.9 | 45.5 |
| Revenue deficit (% of BE April-Dec) | 82.7 | 65.0 |
| STATE GOVERNMENT FINANCES | | |
| Fiscal deficit (% of GDP) | 3.6 (BE) | 5.1 (RE) |
| Primary deficit (% of GDP) | 0.7 (BE) | 2.1 (RE) |
| Revenue deficit (% of GDP) | 1.4 (BE) | 2.6 (RE) |
| MONEY, PRICES & INTEREST RATES | | |
| Money supply (year-on-year) | 13.7 | 12.4 |
| Reserve money (year-on-year) | 14.5 | 13.2 |
| Bank credit (year-on-year) | 19.7 | 5.5 |
| Point-to-point inflation-WPI | 5.25 # | 5.91 ## |
| Prime lending rates | 10.25-10.75 | 10.5-11.0 |
| FINANCIAL MARKETS | | |
| Sensex | 6634 | 5950 |
| EXTERNAL SECTOR | | |
| Merchandise exports ($bn April-Dec ) | 53.5 | 43.3 |
| Merchandise imports ($bn April-Dec ) | 73.7 | 55.1 |
| Foreign exchange reserves ($bn) | 128.9 | 106.6 |
| Current account balance ($mn April-Sept ) | -3260 | +2191 |
| Rs/$ | 43.79 | 45.26 |
| * % change April-Dec; #Week ended Jan 29; ## Week ended | | |
fe Perspective
• Reduce fiscal deficit, abolish subsidies
• Hike infrastructure spends
• Raise FDI limit in all sectors
• Privatise faster
CII suggestions
• Achieve double digit growth in manufacturing for 8% GDP growth
• Raise domestic and foreign investment
FICCi Wishlist
• Raise GDP growth rate to 8-10%
• Hike agriculture growth from 2.1% to 4%
• Increase investment rate
