The Economic Survey 2009-10 is optimistic about the countrys growth prospects over the next couple of years. It expects the gross domestic product (GDP) to grow by up to 8.75 per cent in the next fiscal itself. But it warns against an early exit from the fiscal and monetary stimulus citing low investment growth,fears of net exports turning negative,a mixed industrial performance and low credit offtake. The Surveys prescription on the stimulus can best be described as wait and watch this is different from the view of the Vijay Kelkar-led Thirteenth Finance Commission and the Prime Ministers Economic Advisory Council chaired by C Rangarajan,who have called upon the government to put exit at the top of the agenda. Reviewing the state of the economy,the Survey has noted that the growth in gross fixed capital formation,a proxy for investment growth,is still below the GDP growth rate unlike in the pre-global crisis phase. So,it has suggested a rollback in stimulus only after the full year passes. Investment growth had slipped to 4 per cent in 2008-09 and managed to recover this year,but still stands at 5.2 per cent. The CSO,however,estimates GDP to grow at a much higher rate of 7.2 per cent this year. This makes it necessary to watch the growth recovery in private investment in the third and fourth quarters,in sequencing the rollback of the stimulus measures, the Survey says. It acknowledges that the decline in growth rate was arrested in the second half of 2008-09 largely because of the fiscal stimulus that boosted private as well as government consumption demand. Though there have been clear signs of a recovery since June 2009,it has been helped more by the favourable base effect and mild inflation in manufacturing articles,says the Survey. On the monetary side,the Survey says that retail credit has still not picked up this year. There has been a deceleration of credit to sectors such as industry,personal loans and services during April-November this year compared with the same period last year. It would be necessary to monitor these indicators for an improvement in credit growth,while sequencing measures to roll back the stimulus, the Survey says. This apart,the Survey says India can breach the 9 per cent mark in 2011-12,and move to the rarefied domain of double-digit growth and even attempt to don the mantle of the fastest growth economy in the world.
