Economic Survey: Growth is good, but then... - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Economic Survey: Growth is good, but then...

Feb 25, 2011

The Economic Survey for 2010-11 (FY11) was tabled in the Parliament today. It highlighted the progress made by the Indian economy in FY11 and some big challenges it faces in the future. Let us have a look at the key takeaways from the same.

Painting a rosy picture for economic growth
The Survey talks about how the Indian economy braved the global slowdown and emerged stronger in FY11. It puts out an estimated figure of 8.6% for GDP growth during the year, and also forecasts an 8.75-9.25% growth in the next fiscal (FY12). The Survey has also taken note of the deceleration in industrial growth in recent times. However, it counters it by adding that this is a short term phenomenon and that the long-term growth story remains intact. The FY12 growth estimates are backed by rising savings and investments in the country.

Overall, notwithstanding the challenges on the inflation part, the Survey has painted a rosy picture of high growth for the Indian economy going forward.

Inflation remains the bugbear
The Survey has mentioned high inflation in India as one of the key policy challenges for the government over the next few quarters. It has blamed the rise in food and global commodity prices as the key reasons for the surge in inflation since the end of 2009. The blame has also been put on the easy money policy of the western nations that are trying to jump-start their economies.

The Survey suggests that the government and the RBI are aware of the fact that there is a need to provide ample liquidity to the system so that economic growth is not hampered. However, it is also aware of the potential negative consequences of the same in the form of an even higher inflationary threat in the future.

Short and medium term prospects
As mentioned above, the Survey has projected the Indian economy to grow by 8.75-9.25% in the next year (FY12). This is expected to happen on the back of the government's push towards increased infrastructure investment and consumption. Also, given that both savings and investments are on the rise, it has indicated that the government will soon implement a gradual exit from the stimulus package.

All said, the Survey has added a caveat at the end. It suggests, "Growth forecasts, and for that matter, all forecasts in life, however carefully made, are subject to error. A sharp deterioration in weather conditions or a disproportionate spike in the price of crude petroleum can lead to slower growth." It also warns that deepening of the Euro-zone crisis can also have an adverse impact on the growth prospects of the Indian economy.

As for the long term prospects of the Indian economy, the Survey sounds a bullish tone. And it backs up this view with the usual suspects - rising savings and investment rates, and India's demographic dividend. Overall, it suggests that ‘the next two decades should see the Indian economy growing faster than it has done any time in the past and also faster than the growth in the next two years'.

Now that's like sticking the neck out. It's another thing that the neck risks getting caught in a thunderstorm of global economic crisis, rising fuel prices, and surging inflation.


Equitymaster requests your view! Post a comment on "Economic Survey: Growth is good, but then...". Click here!

  

More Views on News

Data is the New Oil but It's Also the New Sugar. Here's How to Fight it (Profit Hunter)

Jun 1, 2020

Is too much data hurting your quest for market beating returns?

Quantum Mutual Fund: Hum woh nahi hain (The Honest Truth)

Apr 29, 2020

Ajit Dayal on how the mutual fund industry robs you of your wealth.

This One Trigger Could Turnaround Yes Bank's Stock Price (The 5 Minute Wrapup)

Oct 16, 2019

If Yes Bank manages to do this, it could be the start of a much-needed turnaround for the bank.

Gold could Hit 40,000 Sooner Than Expected (Profit Hunter)

Aug 16, 2019

Domestic gold prices are firing on both engines now. Gold prices could touch 40,000 faster than you could imagine.

3 Rebirth of India Opportunities Are Racing Ahead in These Gloomy Times... (Views On News)

Jun 28, 2019

Tanushree Banerjee shares an update on the Rebirth of India and reveals her top 3 trends...

More Views on News

Most Popular

India in Crisis

Here we highlight the crisis scenarios that India could face. The worry is that there aren't really any easy solutions in sig...

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

MARKET STATS