When the new Government came to power around three months ago, it faced various challenges on economic front. The economic growth was showing a downward trend, the inflation was alarmingly high, unemployment rate was worrisome and corruption was touching new heights.
The new government took various steps for boosting growth, controlling inflation and curbing corruption among other measures. The Union Budget 2014 was its first path breaking effort to tackle all these issues upfront. Now all these efforts have started showing results:
GDP growth is showing early signs of recovery. In FY14 India’s economy grew at 4.7 per cent. As per the Central Statistics Office (CSO) data released yesterday Quarterly GDP at factor cost at constant (2004-2005) prices for Q1 of 2014-15 is estimated at Rs14.38 lakh crore, as against Rs13.61 lakh crore in Q1 of 2013-14, showing a growth rate of 5.7 per cent over the corresponding quarter of previous year.
The economic activities which registered significant growth in Q1 of 2014-15 over Q1 of 2013-14 are ‘electricity, gas & water supply’ at 10.2 per cent, ‘financing, insurance, real estate and business services’ at 10.4 per cent and ‘community, social and personal services’ at 9.1 per cent. The estimated growth rates in other economic activities are: 4.8 per cent in ‘construction’, 3.5 per cent in ‘manufacturing’, 2.8 per cent in ‘trade, hotels, transport and communication’, 3.8 per cent in ‘agriculture, forestry & fishing’, and 2.1 per cent in ‘mining & quarrying’ during this period.
- GDP growth is one of early signs of economic recovery. In FY 14, India’s economy grew at 4.7 per cent. We expect the economy to grow at 5.7-5.9% during the current FY and in 2-3 years time reclaim the high growth rate of 7%.
- Headline WPI Inflation after remaining persistent around 7-9 per cent during 2011-13 is showing signs of moderation and has come down to 5.19% in July, 2014.
- Consumer Price Index has fallen from the levels of 8.6% in April, 2014 to 7.96% in July, 2014.
- On account of restored business confidence and improved order book, manufacturing is showing signs of rebound and HSBC PMI has risen to 53 in July, 2014 from 51.5 in June, 2014.
- Due to concessions in Excise duty, Passenger Vehicles sales have grown for the third month in a row, growing by 7.1% Year to Year in July, 2014.
- Growth of 23% in the Capital goods production IS. a healthy indicator of recovery.
- India’s annual infrastructure sector growth ( eight core sector) hit a nine-month high of 7.3 per cent in June, led by a surge in cement and electricity output.Due to increased foreign flows India’s Foreign Exchange Reserves have seen a surge and as in July end were USD 320.6 billion. This is USD 43.4 billion higher than a year ago.
- Despite less than satisfactory Monsoon, food stock in Central pool is comfortable at nearly 62 million tones.
- For ensuring macroeconomic stability Current Account Deficit will be contained within 2% and Fiscal deficit within 4.1% of GDP during CFY.
In the first Budget of this Government certain steps which are only the beginning of a journey towards a sustained growth of 7-8 per cent within the next 2-3 years were outlined.
The Government is committed to the principle of “Minimum Government Maximum Governance”. In the budget it was committed to constitute an Expenditure Management Commission, which will look into various aspects of expenditure reforms including rationalisation of subsidies, to be undertaken by the Government.Since then the Commission has been constituted with the noted economist and Ex-Governor of RBI, Dr. Bimal Jalan heading it.
Besides above, the Government has already expressed through the Budget 2014-15 its intent to fulfil the promises made to the electorate.
The Annexure covers:
- Some of the key promises made to the electorate and achievements made in that regard.
- Pro Poor and Pro Business measures in the Budget 2014-15.
- Structural Reforms Announced in the General Budget 2014-15.