Gist of Economic Survey 2014

Why to Read Economic Survey

Economic survey is a most authentic and realible source for current financial situation of the country. Along with this it also provide what are the steps India needs to take in order to resolve the existing problems. It will help both in prelims as well as in mains; in prelims MCQ can be asked based on particular information and in Mains exam questions based on PDS, Agriculture, Infrastructure, Financial imtermediaries etc. can be prepared from survey. Prelims 2013 question :To obtain full benefit of Demographic dividends what should India do?, was directly from survey. After reading survey you will be able to solve these kind of direct questions as well as factual and analytical questions.

CHAPTER 1

The State of the Economy

In 2014-15, the Indian economy is poised to overcome the sub-5 per cent growth of gross domestic product (GDP) witnessed over the last two years, which affected the industry sector. Inflation although came down but remained above the comfort level. But we have seen improvement in the External sectors like CAD and FD. Crisis in global economy, Structural constraints and inflationary pressures, resulted in a protracted slowdown.
Indian economy sinked from average of 8.3 percent between 2003-04 and 2011-12 to 4.6 percent for 2012-14, China declined from 6.8 percent to 4.9 percent in this period. Slowdown in Manufacturing is muchmore deeper with growth of 0.2% only in between 2012-14. WPI declined to 6.0% in 2013-14 from 8.9% in 2011-12 and 7.4% in 2012-13, it is still above comfort zone, with extremely high level food inflation of 12.2% annual average between five years ending 2014.

External sector saw remarkable turnaround from first quarter of 2013-14, with year ended at CAD at 1.7% of GDP against 4.7% in 2012-13. Rupee went down to 68.36 in dollar terms, when US announced tapering of quantitative easing, but gradually ended the year at 61. Foreign exchange also increased from 273.5 billion in Sept 2013 to 315 billion in June 2014. Fiscal deficit decreased from 5.7% of GDP in 2011-12 to 4.5% of GDP in 2013-14, but most of this is due to reduction in expenditure rather than increased revenue.

Growth reached a low of 4.4% in last two quarters of 2012-13, then increased to 5.2 % in first quarter 2013-14 and declined again to 4.6% in last two quarters. This has happened despite a global economic recovery.

Structural Constraints in Indian economy

Difficulties in taking quick decisions on project proposals have resulted in considerable project delays and insufficient complementary investments.
Ill-targeted subsidies resulted in reduction of money for investment and also distorted the resource allocation.
Low manufacturing base and very low manufacturing growth, especially of Capital goods.
Large informal sector and low agricultural productivity.
High inflation from last few years and significant presence of intermediaries in different tiers of marketing, storage, processing etc.

GROWTH

Sectoral Growth Trend

Mining and Quarrying Mining and Quarrying sector showed a -1.4% growth. Two prominent components of mining coal and petroleum, have stagnated in the last three years. The slowdown in coal is partially because of Regulatory issues. Coal and Petroleum are universal intermediates, slowdown in their production impact the whole economy.