The Indian economy is presently operating in a very challenging environment partly because of worldwide economic weakness and partly due to some home grown factors. This period of growth is marked as a period of the slowest growth in the last one decade.
India’s GDP grew by just 5.5% and 5.3% in the first two quarters of the fiscal year 2012-2013,compelling Central Statistical Organization (CSO) to lower down the growth target to 5% for the year as a whole.
The major domestic factor causing a slower growth is the weakness in the industrial sector. The Index of Industrial Production saw a meager increase to 0.7% between April 1 and December 2012 as compared to 3.7% for the corresponding period in 2011-2012. The agricultural sector is also witnessing a slower growth because of an early monsoon, thus affecting the growth of other allied sectors.Over cautious monetary policy and restricted credit conditions hinder the possibility of investment led growth revival.
However now India is witnessing a change in the direction of wind and there are favorable chances of its early revival and growth. Based on current predictions the growth rate of India is expected to� be within the range of 6.1%-6.7% in the fiscal year beginning from January 2013.
Inflation persisted at 7%-8% for most part of the fiscal year 2012-2013 . However WPI inflation fell to 6.6% in January 2013, the lowest since December 2009.Though it is a positive signal but most of the decline persisted in the non-food manufacturing inflation. Food prices are still high and is a major area of concern. Rising food inflation has widened the gap between inflation estimated using WPI and CPI to over 4% in January 2013, mainly because of higher weights being assigned to food items in CPI.India continues to witness a double digit inflation (CPI measured) which stood at 10.8% in January.
Though the government managed to reduce fiscal deficit prior to the fiscal year 2011-2012, the fiscal deficit once again expanded to 5.7% in the last quarter of 2012. However in the new budget finance minister has said that fiscal deficit would be limited to 4.8% of GDP during the fiscal year 2013-2014, through measures largely dependent on expenditure cuts and disinvestment proceeds.
India’s current account deficit (CAD) rose to about 5.4% of GDP in second quarter of 2012-2013.To manage CAD government has increased tariffs on gold from 4% to 6% in 2013.In order to lower down the CAD and to ensure constant inflow of foreign portfolio investment,government has decided to avert the implementation of General Anti Avoidance Rules,GAAR.
Union Budget 2013-2014 Highlights
• Amount set aside for planned expenditure amounts to Rs 5,55,322 crore out of the total expenditure of 16,65,927 crore.
• The structure for direct and indirect taxation remains largely unaltered. The revenue addition from the new measures like surcharges on high income earners and enhanced levies on luxury consumption are quantified at Rs 18000 crore.
• The budget has left the personal income tax slabs unchanged.
• A minor relief for those at the lower end of the taxable bracket will get a tax credit of Rs 2000, having annual income of less than Rs 500000.
• A surcharge of 10% for those earning more than 1 crore per year will be charged.
• Firms whose earnings exceeds Rs 10 crores will have to pay a surcharge of 10%. For foreign firms surcharge will rise from 2% to 5%.
• The excise duty on sports utility vehicle will rise from 27% to 30%.
• Customs duty on imported cars is from 75% to 100%.
• Government has proposed to allocate Rs 14873 crore to the Jawaharlal Nehru National Urban Renewal Mission.
• Small and Medium Enterprises (SMEs) including start up companies can list on SME Exchange without being required to make an Initial Public Offering(IPO) of shares.
• The finance minister proposed Rs 2400 crore to modernize the power-loom segment under the technology up-gradation fund scheme (TUFS).
Indian Economy From 1980-2013 -GDP and Inflation
|Year||GDP % Change||Inflation % Change||Year||GDP % Change||Inflation % Change|
Source: World Bank
|Last Updated on : 23th February 2015||Next Update : February 2016|