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ASSOCHAM National Economic Affairs Council

Weathering the Current Economic Turmoil - Immediate Policy Agenda. ASSOCHAM National Economic Affairs Council. MC Meeting, 4 th September 2013. Dimensions of Current Turmoil. GDP growth: 4.4% (Q1: 2013-14) (Manufacturing: -1.2%, Services: 6.6%, agrl.:2.7%)

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ASSOCHAM National Economic Affairs Council

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  1. Weathering the Current Economic Turmoil - Immediate Policy Agenda ASSOCHAM National Economic Affairs Council MC Meeting, 4th September 2013

  2. Dimensions of Current Turmoil • GDP growth: 4.4% (Q1: 2013-14) • (Manufacturing: -1.2%, Services: 6.6%, agrl.:2.7%) GDP growth: 9.5% in 2010-11, 6.2% in 2011-12, 5 % in 2012-13. • Wage growth surpassed labour productivity growth during 2008-09 to 2010-11, possibly adding to inflation pressures • Contd.. ASSOCHAM National Economic Affairs Council

  3. Dimensions of Current Turmoil (contd..) The short fall of domestic savings to domestic investments i.e., savings-investment gap, increased from -1.3% in 2007-08 to -4.2 percent in 2011-12. Value of industrial investments proposed came down to Rs. 3.2 lakh crore between Jan-July 2013 as against Rs. 4.4 lakh crore in Jan-July 2012 Thus, the effect of industrial reforms, introduced in 1990s, has by now visibly faded. ASSOCHAM National Economic Affairs Council 3

  4. Main Causes of Current Turmoil • Fiscal Deficit: 4.9% of GDP( 2012-13). Actuals stood at 62.8% of the budgeted fiscal deficit between April-July 2013. • The benchmark 10 year Government security yield is hovering at 8.6 percent. • The Current Account Deficit stood at unsustainable level of 4.8% of GDP during 2012-13. • Retail inflation is still hovering at double digit level. ASSOCHAM National Economic Affairs Council

  5. Main concerns • Increasing fiscal deficit owing to high revenue deficits that are largely financed by borrowings • Low business confidence due to lack of transparent and predictable government policies • Skewed inflation where costs input costs are increasing at a higher rate than that of output prices • Growing import dependency and high currency volatility causes of concern. • High transaction costs and need for process reforms ASSOCHAM National Economic Affairs Council

  6. Well Known Policy Solutions • Reviving Business confidence • Creating strong supply response • Fiscal stimulus to revive investments • Boosting public investment to crowd in private investment • Fiscal prudence • Revisiting Manufacturing and Exports Strategies ASSOCHAM National Economic Affairs Council

  7. Current Agenda Formulating policy recommendations with the objective of: • Identifying the short-term policy measures having immediate visible effect on economic growth. • Short-term policy recommendations in terms of ‘Dos’ and ‘Don'ts’ • What does industry need immediately so that their top and bottom lines improve? ASSOCHAM National Economic Affairs Council

  8. Specific Focus Areas • Investment and Capital Inflows • Industry and Manufacturing • Infrastructure • Services • Foreign Trade • Fiscal Policy • Monetary Policy ASSOCHAM National Economic Affairs Council

  9. Need of the Hour • Provide your invaluable inputs on urgent basis in line with the purpose • Making this initiative relevant ASSOCHAM National Economic Affairs Council

  10. Thank You ASSOCHAM National Economic Affairs Council

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