Survey buoyant on growth; suggests gradual stimulus rollback

New Delhi, Feb 25 (PTI) A day before the Budget, the
Economic Survey on Thursday predicted up to 8.75 per cent
growth in 2010-11 while recommending a gradual roll back of
stimulus -- a move that could entail hike in excise duty and
service tax.
Warning that high double digit food prices could lead to
"higher-than-anticipated" general level of inflation, the
Survey called for effective steps to be taken to remove
supply-side bottlenecks together with other policies.
The Survey said the government policy, other calibrated
measures and tax reliefs as contained in the stimulus have
helped the economy shrug off effects of slowdown triggered by
global financial meltdown in 2008.
The buoyancy in the economy in tandem with reforms would
make India possibly the fastest growing eocnomy in the next
four years, it said while recommending that there was a need
for improving government financial by way of rasing tax and
non-tax revenues and containing deficit.
Last week, the Prime Minister's Economic Advisory Council
too had suggested partial roll back of stimulus measures,
including raising excise duty and service tax rates.
The Survey also echoed this view: "...The broad-based
nature of the recovery creates scope for a gradual rollback,
in due course, of some of the measures undertaken over the
last 15-18 months... so as to put the economy back on to the
growth path of nine per cent annually."
The economy is projected to grow by 7.2 per cent this
fiscal with industrial and services sectors growing at 8.2 and
8.7 per cent respectivelly. Full recovery is likely over the
next two fiscals with up to 8.75 per cent growth in 2010-11
and nine per cent the subsequent year.

Critical about the government's policy, particularly
over the very high consumer price inflation, the Survey said
that the "hype" over kharif crop failure without taking into
account the comfortable food stocks and rabi prospects "may
have exacerbated inflationary expectations encouraging
hoarding and resulting in a higher inflation in food items.
"... in the case of sugar, delay in the market release
of imported raw sugar may have contributed to the overall
uncertainty, thereby allowing prices to rise to unacceptably
high levels in recent months," it added.
Elaborating on the prospects in the short and medium
terms, the Survey observed that gross domestic savings stood
at 32.5 per cent of GDP in 2008-09, while the gross domestic
capital formation (investment) was 34.9 per cent.
"The rates of savings and investment have reached levels
that even ten years ago would have been dismissed as a
pipedream for India. On this important dimension, India is now
completely a part of the world's fastest growing economies."
Indian economy has been one of the least affected by the
global crisis. "In fact, India is one of the growth engines,
along with China, in facilitating faster turnaround of the
global economy. Risks, however, remain," it added.
On the foreign trade front, which had taken a beating
in 2009, the economic document said it is looking up with the
prospects of recovery in the world output and trade volumes.
The downside risks for world and Indian trade lie in the
fact that though the fall has been arrested, both output and
trade recoveries are still fragile given the fact that the
recovery has been pumped up by the stimulus given by different
countries, including India, the effects of which may dry up if
natural recovery does not follow. PTI SKB
AHM