Survey gung-ho on growth, but predicts higher inflation (Lead)

February 25th, 2011 - 4:56 pm ICT by IANS  

Pranab Mukherjee New Delhi, Feb 25 (IANS) India’s Economic Survey for 2010-11 has predicted 8.6 percent growth for the current fiscal and gross domestic product (GDP) touching the 9 percent mark in 2011-12. It has also sounded concern over inflation and the fall in factory output in the coming months.Finance Minister Pranab Mukherjee tabled the annual report on the economy in the Lok Sabha Friday, which was gung-ho about growth prospects and said that manufacturing and services sector had registered impressive gains.

While industrial output was pegged at 8.6 percent, manufacturing growth was 9.1 percent and services 9.6 percent in 2010-11.

“The growth has been broad based with a rebound in the agriculture sector, which is expected to grow around 5.4 percent,” read the annual report on the economy.

“Increased minimum support price along with various other steps taken by the government have resulted in higher levels of food-grains,” it added.

However, the survey has warned against inflationary pressures on the economy in the coming months.

“Inflation is expected to be 1.5 percent higher than what would be if the country was not on the growth curve,” it said and suggested that in order to check food inflation the government improve delivery mechanisms by strengthening institutions and addressing corruption.

It said programmes like the rural employment scheme had led to growing purchasing power of consumers, which partly contributed to the high inflation.

India’s food inflation rose to 11.49 percent for the week ended Feb 12, moving up again after falling for a few weeks. The annual inflation based on wholesale prices stood at 8.23 percent in January.

The Economic Survey also advocated more monetary tightening by the Reserve Bank of India, and said hiking interest rates would help in reducing inflationary pressures.

“The current growth and inflation trend warrant persistence with and anti-inflationary monetary stance.”

The survey also sounded alarm on industrial output as there had been no significant capacity expansion in core industries.

The review document said investment in infrastructure has reached 7.18 percent of GDP in 2008-09 and is expected to increase to 8.37 percent by end of 11th five-year plan (March-end 2012).

“Slow rate of capacity addition in physical infrastructure sector is constricting industrial sector growth. Capacity addition in core sectors and renewal of bottlenecks would spur industrial sector output in the medium to long term,” it said.

“Unmet gaps still remains large and accelerated investments will be needed in the next plan period for addressing delays, cost overruns and regulatory and pricing impediments.”

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