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    Oct 20, 2009

    PRESS RELEASE ON ECONOMIC OUTLOOK FOR 2009-10 :- HIGHLIGHTS

    The Indian economy weathered the financial turbulence well

    · 6.7 % growth in 2008/09 – amongst the highest growth rates in the world.

    · well calibrated adjustments in the monetary and fiscal policies

    Projected growth 6.5 % in 2009/10 against 6.7 % in 2008/09

    · Agriculture : -2.0 % (1.6% in 2008/09)

    · Industry (including construction) : 8.2% (3.9% in 2008/09)

    · Services: 8.2 % each. (9.7% in 2008/09)

    Unlikely that growth will be lower than 6.25 % but may reach 6.75 %.

    Impact of international conditions

    · Recession, higher household savings and demand contraction in developed economies- adverse for exports growth.

    · Encouraging signs of revival of capital flows.

    · A further negative shock to the global financial system and global inflation could threaten growth in Indian economy.

    Investment rate unchanged from 2008/09

    · Projected investment rate in 2009/10: 36.5%. Will pick up with improvement in domestic conditions.

    · Projected savings rate 34.5% in 2009/10 (33.9% in 2008/09)

    22.7 % deficiency in the SW monsoon will lower agricultural output

    · Large acreage losses under kharif foodgrain, mainly rice. Rabi prospects good

    · Projected food grain production:223 million tonnes in 2009/10 (234 mt in 2008/09)

    Current Account Deficit: - 2.0 % of GDP in 2009/10 (– 2.6 % in 2008/09)

    · Exports projected at $188.9 billion in 2009/10

    · Imports projected at $306 billion in 2009/10

    · Projected merchandise trade deficit for 2009/10:$ 117 billion or 9.4 % of GDP.

    · Projected net invisibles: $92.2 billion. Service exports & remittances have revived.

    Capital inflows of $57.3 billion in 2009/10 ($9.1 billion in 2008/09)

    · Net accretion to reserves : $31.6 billion ( – $20.1 billion in 2008/09)

    Surge in food inflation

    · 13% annualized increase in overall WPI index and 33% for primary food index in first half of 2009/10. Sharper rise in CPI indices.

    · Global inflationary pressures will be high – oil and commodity prices rising

    · Inflation in March 2010 expected around 6%

    Improvement in financial conditions – global and domestic

    · Recovery in international loan and equity markets – lower LIBOR/CDS spreads

    · Bank credit sluggish till September 2009 but corporate sector raised large amounts from the domestic capital market through debt and equity issuance.

    · Calibration of monetary measures will depend on growth and inflationary pressures.

    Serious fiscal strain

    · Projected consolidated fiscal deficit: 10.09% in 2009/10 (8.6% in 2008/09). Higher revenue and primary deficit to persist.

    · Debt of centre and states as a ratio of GDP is projected to increase to over 77% in 2009/10

    · Need to return to fiscal consolidation

    Some Policy Options – focus on agriculture and power

    · Short Term - managing inflation, specially food price inflation

    § Protect and enhance Rabi crop.

    § Focus on strengthening PDS distribution system

    · Medium Term – Farm economy and power

    § Improve farm productivity – use technology optimally

    § Imperative need to achieve targets and have an active plan over a

    Time horizon of 15 years for capacity creation in electricity

    § Actively explore fuel sources like natural gas and nuclear energy

    Table A: Growth – Past Performance and Projections for 2009/10

    Annual Rates

    2004/05

    2005/06

    2006/07

    2007/08

    QE

    2008/09

    Rev

    2009/10

    Projected

    Percentage change over previous year

    1. Agriculture & allied activities

    0.0

    5.8

    4.0

    4.9

    1.6

    –2.0

    2. Mining & Quarrying

    8.2

    4.9

    8.8

    3.3

    3.6

    10.0

    3. Manufacturing

    8.7

    9.1

    11.8

    8.2

    2.4

    7.7

    4. Elect., Gas & Water Supply

    7.9

    5.1

    5.3

    5.3

    3.4

    7.4

    5. Construction

    16.1

    16.2

    11.8

    10.1

    7.2

    8.8

    6. Trade, Hotels, Transport, Storage & Communication

    10.7

    12.1

    12.8

    12.4

    9.0

    8.4

    7. Finance, insurance, real estate & business services

    8.7

    11.4

    13.8

    11.7

    7.8

    8.0

    8. Community & personal services

    6.8

    7.1

    5.7

    6.8

    13.1

    8.0

    9. Gross Domestic Product (factor cost & constant prices)

    7.5

    9.5

    9.7

    9.0

    6.7

    6.5

    Industry (2 + 3 + 4 + 5)

    10.3

    10.2

    11.0

    8.1

    3.9

    8.2

    Services ( 6 + 7 + 8 )

    9.1

    10.6

    11.2

    10.9

    9.7

    8.2

    Non-agriculture (9 – 1)

    9.5

    10.4

    11.2

    9.9

    7.8

    8.2

    GDP (factor cost, const. prices) per capita

    5.8

    7.8

    8.2

    7.5

    5.2

    5.0

    Some Magnitudes

    GDP factor cost – 1999/00 prices (Rs trillion)

    (Rs lakh crore i.e. Rs trillion)

    26.0

    28.4

    31.2

    34.0

    36.1

    38.8

    GDP market & current prices (Rs trillion)

    31.5

    35.9

    41.3

    47.2

    53.2

    58.6

    GDP market & current prices ( US$ Billion)

    701

    810

    913

    1,175

    1,166

    1246

    Population (million)

    1,089

    1,106

    1,122

    1,138

    1,154

    1,170

    GDP current & market prices per capita (Rs)

    28,894

    32,430

    36,802

    41,506

    46,107

    50056

    GDP current & market prices per capita (US$)

    643

    732

    813

    1,033

    1,010

    1065

    Table B. Balance of Payments

    US$ billion

    2004/05

    2005/06

    2006/07

    2007/08

    2008/09

    2009/10

    Merchandise Exports

    85.2

    105.2

    128.9

    166.2

    175.2

    188.9

    Merchandise Imports

    118.9

    157.1

    190.7

    257.8

    294.6

    306

    Merchandise Trade Balance

    -33.7

    -51.9

    -61.8

    -91.6

    -119.4

    -117.1

    -4.80%

    -6.40%

    -6.80%

    -7.80%

    -10.20%

    -9.40%

    Net Invisibles

    31.2

    42

    52.2

    74.6

    89.6

    92.2

    o/w Software & BPO

    14.7

    23.8

    27.7

    37.3

    45.2

    47.3

    Private Remittances

    20.5

    24.5

    29.8

    41.7

    44

    50.4

    Investment Income

    -4.1

    -4.1

    -6.8

    -4.3

    -4

    -6.1

    Current Account Balance

    -2.5

    -9.9

    -9.6

    -17.03

    -29.8

    -25

    -0.40%

    -1.20%

    -1.00%

    -1.40%

    -2.60%

    -2.00%

    Foreign Investment

    13

    15.5

    14.8

    45

    3.5

    46.9

    o/w FDI (net)

    3.7

    3

    7.7

    15.4

    17.5

    22.8

    Inbound FDI

    6

    8.9

    22.7

    34.2

    35

    36.9

    Outbound FDI

    2.3

    5.9

    15

    18.8

    17.5

    14.1

    Portfolio Capital

    9.3

    12.5

    7.1

    29.6

    -14

    24.1

    Loans

    10.9

    7.9

    24.5

    41.9

    5

    8.7

    Banking Capital

    3.9

    1.4

    1.9

    11.8

    -3.4

    2.9

    Other capital

    0

    1.2

    4.2

    9.5

    4.2

    -1.1

    Capital Account Balance

    28

    25.5

    45.2

    108

    9.1

    57.3

    4.00%

    3.10%

    5.00%

    9.20%

    0.80%

    4.60%

    Error& Omissions

    0.6

    -0.5

    1

    1.2

    0.6

    -0.8

    Accretion & Reserves

    26.2

    15.1

    36.6

    92.2

    -20.1

    31.6

    3.70%

    1.90%

    4.00%

    7.80%

    -1.70%

    2.50%

    Memo

    GDP mp Rs crores

    3149407

    3586743

    4129174

    5321753

    5321753

    5856569

    US$ billion

    701

    810

    913

    1166

    1166

    1246

    Forex rate (Rs per US$)

    44.93

    44.27

    45.25

    45.63

    4563

    47

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