India Economic Update, September 2012

Real gross domestic product (GDP) growth has slowed to a nine year low of 6.5 percent for FY2011-12, from 8.4 percent in the two previous years. The slowdown was most pronounced in the industrial sector, and more specifically in manufacturing and mining. In the quarter ending in June 2012, industrial output growth as measured by the Index of Industrial Production (IIP) has been negative. The contraction was particularly pronounced in the production of capital goods, which is in line with falling investment demand on the expenditure side of the National Accounts. The current account deficit reached a record 4.2 percent of GDP in FY2011-12, because of decelerating export growth and high crude prices. Merchandise exports grew by 41 percent in September 2011, but their growth slowed to 2 percent by August 2012 (measured as 12-months cumulative exports compared with the same 12 months of the previous year). Inflation reached 7.6 percent in August 2012. This represents a marked slowdown since September 2011, but there has been an uptick in food prices in recent months. Also, higher domestic prices for fuel, which are necessary to rein in spending on subsidies, will contribute to inflationary pressure. Inflation is therefore expected to reach 8 percent at end-March 2013. Real GDP growth is forecast to reach around 6.0 percent in FY2012-13, after 5.3 percent growth Q4 of FY2011-12 and 5.5 percent growth in Q1 of FY2012-13. The slowdown is at least partly caused by structural problems. These include power shortages, which are partly caused by the financial difficulties facing the electricity sector as discussed in the special topic section of this update, the corruption scandals that have hit the mining and telecom sectors, investor uncertainty because of pending changes in legislation (mining, taxes, land acquisition), and the tightening constraints of land and infrastructure. Tighter macroeconomic policies, slow growth in the core Organization for Economic Co-operation and Development (OECD) countries, and worries about another global recession also weigh on growth. Important signals to revive domestic growth drivers to lift sentiment more than produce instant efficiency gains could come from reforms recently announced and, more importantly, the reform of direct taxes, the implementation of the long-delayed Goods and Services Tax (GST), and passage of the land acquisition and mining bills. This update also looks closely at two important topics for medium- and long-term growth, namely India's Right to Education (RTE) Act, which aims to shape elementary education, and the financial difficulties in the Indian power sector.

Bibliographic Details

Main Author:	World Bank
Format:	Report biblioteca
Language:	English en_US
Published:	Washington, DC 2012-09
Subjects:	AGGREGATE DEMAND, AGRICULTURE, ARREARS, ASSET PRICE, ASSET QUALITY, AUCTIONS, AVERAGE COSTS, BALANCE OF PAYMENTS, BALANCE SHEET, BANKING SECTOR, BANKING SYSTEM, BASIS POINTS, BENCHMARKS, BILLS, BOND, BOND YIELDS, BONDS, BUDGET DEFICIT, CAPACITY CONSTRAINTS, CAPITAL ACCOUNT, CAPITAL ADEQUACY, CAPITAL BASE, CAPITAL FLOWS, CAPITAL FORMATION, CAPITAL GAINS, CAPITAL GOODS, CAPITAL INFLOWS, CAPITAL OUTFLOWS, CAPITAL OUTLAYS, CAPITAL STOCK, CAPITAL STOCKS, CASH RESERVE, CASH TRANSFERS, CENTRAL BANK, CENTRAL BANKS, CENTRAL GOVERNMENT DEBT, COLLATERAL, COMMERCIAL BANKS, COMMODITY PRICE, COMMODITY PRICES, CONSOLIDATION, CONSUMER PRICE INDEX, CONSUMERS, CREDIT AVAILABILITY, CURRENCY ASSETS, CURRENT ACCOUNT, CURRENT ACCOUNT DEFICIT, DEBT ISSUES, DEBT RESTRUCTURING, DECLINE IN INVESTMENT, DEFAULTS, DEFICITS, DEPOSIT, DEPOSITS, DERIVATIVES, DEVALUATION, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DOMESTIC DEBT, DOMESTIC ECONOMIC ACTIVITY, DOMESTIC PRICES, ECONOMIC DEVELOPMENTS, ECONOMIC GROWTH, ECONOMIC PROGRESS, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKET CURRENCIES, EMERGING MARKETS, EQUITY FLOWS, EQUITY INVESTMENT, EXCHANGE RATE, EXPENDITURE, EXPENDITURES, EXPORT COMPETITIVENESS, EXPORT GROWTH, EXPORTERS, EXPORTS, EXTERNAL COMMERCIAL BORROWINGS, EXTERNAL DEBT, EXTERNAL FINANCING, FINANCES, FINANCIAL CRISIS, FINANCIAL SAVINGS, FINANCIAL SECTOR, FINANCIAL SYSTEM, FINANCING OF INVESTMENT, FINANCING REQUIREMENTS, FISCAL BURDEN, FISCAL DEFICIT, FISCAL DEFICITS, FIXED CAPITAL, FOOD PRICES, FORECASTS, FOREIGN CURRENCY, FOREIGN CURRENCY ASSETS, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN EXCHANGE MARKET, FOREIGN EXCHANGE RESERVES, FOREIGN INVESTMENTS, FOREIGN INVESTORS, FOREIGN RESERVES, GLOBAL ECONOMY, GLOBAL MARKET, GOLD, GOVERNMENT BONDS, GOVERNMENT BORROWING, GOVERNMENT BUDGET, GOVERNMENT EXPENDITURE, GOVERNMENT EXPENDITURES, GOVERNMENT FUNDING, GOVERNMENT OWNERSHIP, GOVERNMENT SAVINGS, GROSS DOMESTIC PRODUCT, GROSS FIXED CAPITAL FORMATION, GROWTH RATE, HIGH INFLATION, HOUSEHOLD SAVINGS, HUMAN RESOURCE, IMPORT, IMPORT GROWTH, IMPORTS, INCOME TAX, INFLATION, INFLATION RATES, INFLATIONARY PRESSURE, INFLATIONARY PRESSURES, INFRASTRUCTURE BONDS, INTEREST PAYMENTS, INTEREST RATE, INTEREST RATES, INTERNATIONAL FINANCIAL CRISIS, INTERNATIONAL FINANCIAL MARKETS, INTERNATIONAL INVESTORS, INTERNATIONAL RESERVES, INVENTORIES, INVENTORY, INVESTING, INVESTMENT CLIMATE, INVESTMENT DEMAND, INVESTMENT PROJECTS, INVESTMENTS IN GOVERNMENT SECURITIES, INVESTOR PERCEPTIONS, INVESTOR UNCERTAINTY, JOINT STOCK COMPANIES, LEGISLATIVE FRAMEWORK, LENDERS, LIQUIDITY, LIQUIDITY CONSTRAINTS, LOAN, LOAN PORTFOLIOS, LOCAL CURRENCY, LOCAL GOVERNMENTS, MACROECONOMIC POLICIES, MACROECONOMIC POLICY, MARKET PRICES, MATURITY, MERGERS, MONETARY POLICY, NATIONAL DEBT, OIL PRICE, OIL PRICES, OPTIMIZATION, PHYSICAL ASSETS, PORTFOLIO, PORTFOLIO CAPITAL, PORTFOLIO FLOWS, PORTFOLIO INVESTMENTS, POTENTIAL OUTPUT, PRICE CHANGES, PRIME LENDING RATE, PRIVATE CONSUMPTION, PRIVATE INVESTMENT, PRODUCTION FUNCTION, PROFIT MARGINS, PUBLIC INVESTMENT, PUBLIC SECTOR BANKS, PUBLIC SECTOR BORROWING, PUBLIC SPENDING, PURCHASING POWER, RATES OF RETURN, REAL GDP, REAL INTEREST, REAL INTEREST RATE, RECESSION, REMITTANCES, REPO, REPO RATE, RESERVE, RESERVE REQUIREMENT, RESERVE REQUIREMENTS, RESERVES, RISK AVERSION, SAFETY NETS, SAVINGS RATE, SHORT TERM DEBT, SHORT-TERM BORROWING, SHORT-TERM CAPITAL, SHORT-TERM DEBT, SHORT-TERM EXTERNAL DEBT, SIDE EFFECTS, SLOW GROWTH, SLOWDOWN, SOVEREIGN BOND, SOVEREIGN RATING, STOCK MARKET, STOCK MARKETS, STRUCTURAL PROBLEMS, SURPLUS, TAX, TAX BENEFITS, TAX POLICIES, TAX POLICY, TAX RATES, TOTAL COSTS, TOTAL DEBT, TOTAL FACTOR PRODUCTIVITY, TOTAL REVENUE, TRADE DEFICIT, TRADING, UNEMPLOYMENT, UNEMPLOYMENT RATE, WAGES, WITHDRAWAL, WORKING CAPITAL,
Online Access:	http://documents.worldbank.org/curated/en/194611468049195508/India-economic-update https://hdl.handle.net/10986/27069
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