Economic survey reveals gravity of economic situation

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Finance Minister Arun jaitley
In a bid to revive the business sentiments in the country, Finance Minister Arun Jaitley announced some major concerns to spur growth. A day ahead of his General Budget speech, the Economic Survey 2013-2014(which is a document of the Ministry of Finance reflecting the Government's view on annual economic development) was presented in the Lok Sabha. Inflation was addressed as one of the key concern in the survey.

It has also favoured the Direct Cash Transfers, endorsing fuel prices to be market guided and also sought a $1 trillion investment in infrastructure development over the next five years.

Some of the salient features of the survey:

* Battling stubbornly high inflation: The survey said that Headline WPI (wholesale price index) inflation is expected to moderate by the end of 2014. However, Inflation rose to five-month high of 6.01 per cent in May and with signs of EL Nino weather phenomenon this year leading to weak monsoon have badly effected the agricultural output. Containing spiraling prices is among the top priorities for the Modi Government.

* CAD to be contained at 2.1 % of GDP in 2014-15: With fiscal deficit being 4.5% of GDP in 2013-14 Jaitley is expected to work on reviving the macroeconomic environment and take steps to rationalize expenditure in the budget tomorrow. The Finance Minister is also expected to take a call on reducing duties on gold import, which were increased last year to check ballooning current account deficit(CAD).

* Power generation fell short by nearly 8 billion units of the target of 975 billion units in last fiscal: The survey also focused on electricity generation which was deficient in the last fiscal year. "Electricity generation by the utilities was targeted at 975 billion units, of which 967.15 billion units were achieved during the financial year 2013-14," the pre-budget survey tabled in Parliament said.

* Labour reforms: The new Government has come up with proposal which is expected to provide more facilities and resources to the working class. Experts believe, that the proposed measures will improve the condition of labourers and will be conducive for industries.

* Improvement in manufacturing, Balance of Payments (BoP) expected in 2014-15: The improvement in Balance of Payment is also in focus to check CAD.

* There are concerns over El Nino emergence this year: EL Nino weather phenomenon leading to weak monsoon this year may create shortage of supply, further leading to price rise.

GDP growth seen at 5.4-5.9 per cent in 2014/15

* Direct Taxes Code (DTC), which proposed an overhaul of the six-decades old Income Tax Act, required as clean and modern replacement for Income Tax laws.

* Need to promote structural changes in manufacturing in the medium term: To raise the output level in the manufacturing sector, the Government emphasized in the need to bring reforms in the structure.

* GDP growth seen at 5.4-5.9 per cent in 2014/15. Growth observed low on domestic, external factors. The 7-8 per cent of GDP target looked still a distance dream.

* Rupee has stabilized, reflecting an overall sense of confidence in the forex and capital markets: Rupee no doubt stabilized to a great extent from almost 70 to a dollar last year to around 60 a dollar.

According to PTI, as the new Government is struggling to curb high food inflation, the survey forecast that the headline inflation (which shows rise in whole sale price) would ease by year end, providing room to the RBI to cut interest rates.

"Headline WPI (wholesale price index) inflation is expected to moderate by the end of 2014. However, risks to the outlook stems from possible sub-normal monsoon and higher crude oil prices (on account of the crisis in Iraq)," the Economic Survey 2013-14 said.

The Narendra Modi led Government's first survey revealing the gravity of economic situation a day ahead of it's maiden budget, pointed that not all the money put into subsidy schemes reaches the poor while attributing rise in fiscal deficit after 2008-09 due to increase in subsidies. This was mainly due to lack of structural reforms.

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