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Economic Growth Of India In 2011
INDIA of today is quite different from what it used to be in the past, as for as growth chart is concerned, it has changed to better. Common people agree that more opportunities have emerged and atmosphere have become conductive for commencement and growth of business. On the whole, we can say, Indian economy is growing at good rate.
The main sectors that are responsible for growth of economy are Industry and service, Agriculture, trade, public finance, money credit and prices.
The IIP recorded a 5.9% growth in November 2011 compared to 6.4% in previous fiscal year. In fact there was a negative growth in one month fearing the severe job losses, but in the following month there was positive sign of growth. The contraction is due to the poor performance in mining (after the ban on mining in Karnataka following the verdict of supreme court) and manufacturing sector.
The prospect of Agriculture sector shown a steady improvement as agricultural GDP for first half of current financial year has witnessed growth of 3.6%. The price of pulse and vegetable has in fact experienced a fall in price. Similarly, price of manufacturing food products has witnessed lower level of inflation following the hike in the interest rates by RBI indicating inflation finally coming under control.
The export target of 2011-12 was estimated at $300 billion. Export performed well in first half of 2011-12 and significant deceleration in third quarter. There was 36% growth in first half of 2010-11 and 25.8% in 2011-12. Following the deceleration the expected value of import may not be met. Import demand remained strong.
The fiscal deficit of India is projected to be 9.5% of GDP in2011. The central government fiscal position remained weak despite some recovery in second quarter. The poor performance is due to 1) substantial amount of direct tax refund in the order of Rs 46,847 crore in Q1:2011-12 as compared to Rs 15,758 crore in the corresponding quarter of last fiscal, 2) foregone amount of revenue on account of tax cut on petroleum products, and 3) dismissal performance of non-tax revenue due to slippage of revenue on account of disinvestment of state run companies. Overall there has been significant fall in deficit to GDP ratio.
Inflation was high from past eighteen month, policy inertia has hurt spending and industrial output and, now, capital outflows have pushed the rupee to new low. Thirteen interest rate increases have failed to arrest inflation, which is close to double-digits. Till inflation comes down significantly and the RBI starts reducing the interest rates, high interest costs will weigh on corporate profitability.
Over all we can see growth in the economy in 2011 but failed to meet our expectation, that was projected in beginning of fiscal year. Proper policies to curb inflation at the right time will avoid the cost of growth.
Bharath B Gowda