Economic survey of India 2007-2008

Economic Survey suggests removal of remaining controls on sugar, fertiliser & drug cos; FM confident of avg 9% growth in 11th plan
Economic survey ahead of the Budget says that maintaining 9% rate which is challenging. A double-digit growth is tougher still and a decleration was expected this year. Survey finds fundamentals 'inspire confidence' and an investment climate is 'full of optimism'.
Survey further mentions that revenue deficit is unlikely to be zero next year. Fiscal deficit target of 3% will be met and deficit targets for this year will be achieved. States will turn revenue surplus this year. Survey says that tighter fiscal deficit targets have been proposed for coming years.
As per the survey, inflation is seen lower at 4.1% this year Vs 5.6% last year. Inflation is mainly led by the primary non-food items. Fuel & Power group are the prime contributors to inflation. Investment goods inflation declines to 4.3%. Survey states that current inflation level is positive for investment.
The budget estimates will be increased by Rs 6550 crore over the budget estimates. Survey says that ADR/GDR are important for corporate resource mobilisation. It pointed out that there are greater debt & equity issues in primary market. Insurance and Pension reforms are important for capital markets.
Economic Survey points out that higher relative returns make India an attractive investment destination. India's economic fundamentals are strong and the corporate earnings are expected to be strong. The survey informs that Indian rupee has gone up 9.8% Vs dollar since April '07.
Policy options as per the economic survey are as follows:
1) Some FDI is expected in retail trade.
2) 100% FDI is expected in home appliances and luxury brand chains.
3) 51% FDI in rural-health, weather-cover insurance.
4) 49% FDI in other insurance sectors.
5) 100% FDI in new rural agricultural banks.
6) Freedom to expand and takeover other private banks.
7) Sell old oil blocks for enhanced oil recovery.
8) Amend factories act to allow 60-hour working week.
9) Remove remaining controls on Sugar, Fertiliser, Drug.
10) Disinvest 5-10% in non-navaratnas.
11) List unlisted PSUs with 10% equity sale.
12) Enact new bankruptcy law.
SEBI Panel is working on public issue price discovery. At present, there are 1,219 registered FIIs Vs 1,044 (YoY) and 3,644 FIIs sub accounts Vs 3045 (YoY). Capital inflow including FDI will continue in medium-term. Capital inflows are putting pressure on the prices, the survey informs.
The fall in inflows may affect the equity markets in the short-term. Pressure of rupee rise may ease as capital flows slow. Slower FY08 growth may dampen capital inflows. Survey further says that maintaining current growth level is a challenge. It points out that FDI limit of 26% in insurance sector is 'too low'. It also says that margins and fees are detering the farmer entry into commodity futures. The regulators need to stay alert to avoid irregularities, the survey informs.
Finance Minister P Chidambaram said that he is optimistic about containing inflation in coming year and is confident of average 9% growth in 11th plan. He continue to ensure that climate is conducive for investment and there is no need to ensure non-inflationary growth.