>ECONOMIC PROSPECTS: PM’s Economic Advisory Council (PMEAC) has made certain projections for the economy for financial 2012 & 2013

The PM’s Economic Advisory Council (PMEAC) has made certain projections for the economy for the current financial year as well as indicated prospects for the next one.


■ The rate of growth in FY12 is estimated at 7.1%, which is marginally higher than the projection of 6.9% of CSO due to better growth in agriculture and construction.

• Capital formation is to slip to 29.3%, which is a decline of almost 4 percentage points over the last four years. It had reached a peak of 32.9% in FY08 and dropped to 32.3% FY09 and then to 31.6% FY10 and 30.4% in FY11.
• Farm sector growth to average 3% on record output for rice, wheat and strong trend growth in horticulture and animal husbandry.
• Mining and quarrying sector likely to report negative growth on account of weak coal output growth, restrictions imposed on iron ore production, decline in natural gas production and negative growth in crude oil output.
• Electricity sector to grow at 8.3%.
• Manufacturing and construction to grow by 3.9% and 6.2% respectively.
• Strong growth in the services sector at 9.4%.

■ Balance of Payments (BoP) position will be tight and current account deficit to end at 3.6% for the year. The pressure both in regard to a larger than expected CAD and lower than expected net capital inflows resulted in a very sizeable depreciation of the rupee. In the fiscal year to date, the nominal terms of trade weighted 6-currency index fell by 14%, while in terms of the inflation adjusted effective exchange rate (REER) the decline was 11%. The decline of the rupee vis-à-vis the USD was 19% in April–December 2011. However, there has been some recovery in the course of January and February 2012, with the rupee recovering about 7.5%.


■ WPI inflation projected to be around 6.5% and this has been enabled by both monetary and other public policies.


■ Expansion of the fiscal deficit beyond its budgeted estimate of 4.6% of GDP is an area of concern. Government must strive to contain and improve the efficacy of subsidies.


To read full report: ECONOMIC PROSPECTS
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