Roll No: 8, SIES EMBA 2012
Overview of Indian Economy
Approach to Budget
Key Attributes of 2012-2013 Budget
Challenges Going Forward
OVER VIEW OF INDIAN ECONOMY
The Indian economy had left behind the low-growth track of the early 1980s, following the bold economic reforms initiated in 1991-93. India began to appear as a significant player in the global economy. India’s exports began to climb, its foreign exchange reserves, which for decades had hovered around 5 billion dollars, rose exponentially after the economic reforms and in little more than a decade had risen to 300 billion dollars. Indian corporations that rarely ventured out of India suddenly started investing all over the world and even in some industrialized countries. The globalization of India has given rise to new opportunities but it has also brought with it new challenges and responsibilities. Every time there is a major financial crisis anywhere in the world, there is need to take brace position. And, in turn, the rise and fall of India’s growth rate has an impact on global growth and there is need for India to take this responsibility seriously. The brewing trouble of Euro-zone Debt Crisis is posing a threat to global economical growth and seriously questioning the recovery strategies of various developng economies around the globe.
APPROACH TO THE BUDGET
For Indian economy, recovery was interrupted 2011-2012 year mainly due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan. GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years. India however remains front runner in economic growth in any cross-country comparison. One side, the approach of the last rear budget was mainly to sustain the economic growth, on the flip side the monetary policy was tight and aimed at taming domestic inflationary pressure. Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays. Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery. At this juncture, for the 2012-2013 budget it is prudent to embrace hard decision to improve macroeconomic environment and strengthen domestic growth drivers. If India can build on its economic strength, it can be a source of stability for world economy and a safe destination for restless global capital.
KEY ATTRIBUTES OF 2012-2013 BUDGET
FRBM ACT AMENDMENT
* “Effective Revenue Deficit” and “Medium Term Expenditure Framework” statement are two important features of amendment to FRBM Act in the direction of expenditure reforms. * Effective Revenue Deficit is the difference between revenue deficit and grants for creation of capital assets. This will help in reducing consumptive component of revenue deficit and create space for increased capital spending. SUBSIDIES
* Some subsidies, while being inevitable, may become undesirable if they compromise the macroeconomic fundamentals of economy. Endeavour to scale up and roll out Aadhaar enabled payments for various government schemes to ensure that fruits of subsidy reach the needy sections TAX REFORMS
* Early Enactment of DTC Code. GST network to be set up as a National Information Utility and to become operational by August 2012. DISINVESTMENT POLICY
* For 2012-13, `30,000 crore to be raised through disinvestment. At least 51 per cent ownership and management control to remain with Government. STRENGTHENING INVESTMENT ENVIRONMENT
* Proposal for FDI in multi-brand retail up to 51 per cent. * Various steps proposed to be taken for deepening the reforms in the Capital markets, including simplifying process of IPOs, allowing QFIs to access Indian Bond Market etc. * Various Legislative Reforms like The Pension Fund Regulatory and...