Economic Survey 2011-12: Indian economic growth among global front-runners

NEW DELHI: Managing growth and price stability are the major challenges of macroeconomic policymaking, the Economic Survey 2011-12 said.

In 2011-12, India found itself in the heart of these conflicting demands, it added.

"The Indian economy is estimated to grow by 6.9 per cent in 2011-12, after having grown at the rate of 8.4 per cent in each of the two preceding years. This indicates a slowdown compared not just to the previous two years but 2003 to 2011 (except 2008-9)," it said.

At the same time, sight must not be lost of the fact that, by any cross country comparison, India remains among the front-runners, the Survey added.

"With agriculture and services continuing to perform well, India’s slowdown can be attributed almost entirely to weakening industrial growth. The manufacturing sector grew by 2.7 per cent and 0.4 per cent in the second and third quarters of 2011-12.

"Inflation as measured by the wholesale price index (WPI) was high during most of the current fiscal year, though by the year’s end there was a clear slowdown. Food inflation, in particular, has come down to around zero, with most of the remaining WPI inflation being driven by non-food manufacturing products," it said.

Monetary policy was tightened by the Reserve Bank of India (RBI) during the year to control inflation and curb inflationary expectations. The slowing inflation reflects the lagged impact of actions taken by the RBI and the government, the document said.


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"Reflecting the weak manufacturing activity and rising costs, revenues of the centre have remained less than anticipated; and, with higher-than-budgeted expenditure outgo, a slippage is expected on the fiscal side," it added.

The global economic environment, which has been tenuous at best throughout the year, turned sharply adverse in September 2011 owing to the turmoil in the eurozone, and questions about the outlook on the US economy provoked by rating agencies. However, for the Indian economy, the outlook for growth and price stability at this juncture looks more promising, the Economic Survey said.

"There are signs from some high frequency indicators that the weakness in economic activity has bottomed out and a gradual upswing is imminent," it added.