ECONOMIC SURVEY: 2010-11

 This has been a difficult year in terms of inflation, even though the
overall trend of inflation has been downwards. Inflation peaked around
March and April 2010 and has since been on a downward trend despite
a disturbing turnaround in December 2010.

 As a proportion of the GDP (purchasing power parity [PPP]), the

overall fiscal balance of the world was estimated by the International
Monetary Fund (IMF) (Fiscal Monitor 2010) to have risen from - 0.4
per cent in 2007 to - 2.0 per cent and - 6.8 per cent respectively in 2008
and 2009; it was estimated to have moderated to - 6.0 per cent in 2010
and projected at - 4.9 per cent in 2011.
 In actual terms, the Budget for 2010-11 had estimated the level of
fiscal deficit at Rs.3,81,408 crore and revenue deficit at Rs.2,76,512
crore. At the time of presentation of the Budget for 2010-11 it was
envisaged that nominal GDP (GDP at current market prices) would grow
by 12.5 per cent and was estimated at Rs.69,34,700 crore.

Budgetary developments in 2010-11

 3.7 Against the backdrop of the fast-paced recovery of the

economy in 2009-10 and the elevated levels of food inflation as well as
the recommendations of the Thirteenth Finance Commission (ThFC),
the budget for 2010-11 resumed the path of fiscal consolidation to make
economic growth more broad based and ensure that supply-demand
imbalances are managed better.

 The Budget for 2010-11 indicated that effective management of

public expenditure by bringing it in line with the Government’s
objectives, particularly through proper targeting of subsidies, was a
key factor in fiscal management.

 The Budget for 2010- 11 also announced the operationalization of

the Nutrient Based Subsidy Policy for fertilizers effective 1 April 2010
and indicated that the recommendations of the Expert Group on a Viable
and Sustainable System of Pricing of Petroleum Products would also be
operationalized in due course.

Direct taxes

 3.11 The Budget for 2010-11 carried forward the thrust on

maintaining moderate levels of taxation and expanding the tax base. The
tax slabs under personal income were broadened and the surcharge on
corporate income tax was reduced from 10 per
cent to 7.5 per cent.

The following were the important measures

taken in the Budget for 2010-11:

 The standard rate of excise duty (CENVAT) which was brought

down to 8 per cent after two successive reductions in December
2008 and February 2009 was increased to 10 per cent.
 Excise duty on petrol and diesel was increased by Rs. 1 per litre so
as to restore it to pre-June 2008 levels.
 Full or partial excise duty exemptions concessions available on
some items were withdrawn and duty imposed on them at the rate
of 4 per cent or 10 per cent.

BANK CREDIT
 5.2 Bank credit that started picking up from the last quarter of

2009-10 continued its momentum during 2010-11 as well. The pickup in

credit reflected the improved demand conditions associated with
stronger industrial recovery and growth. Telecom
operators raised credit to pay for 3G/broadband wireless access (BWA)
spectrums, which partly contributed to stronger credit growth in the first
quarter of 2010-11.

BALANCE OF PAYMENTS
 As per the latest data available, the highlightsof BoP developments
during the first half (H1 – April-September 2010) of 2010-11 were
higher trade and current account deficits as well as capital flows visa- vis
the first half of 2009-10.

 The Central Government expenditure on social services and rural

development (Plan and non-Plan) which contributes to human
development has gone up consistently over the years. It has increased
from 13.75 per cent in 2005-06 to 19.27 per cent in 2010-11.

HIGHLIGHTS OF THE ECONOMIC SURVEY

 More than 500,000 jobs added in second quarter

 Virtually every second Indian has access to phone

 Auction for 3G spectrum to provide existing and foreign players to bring in new
technology and innovations.

 India world's 2nd largest wireless network with 525.1 million mobile users

 Gas output up 52.8 per cent to 50.2 billion cubic meters with RIL starting
production

 Steel outlook for 2010 remains positive

 See shortfall in FY10 non-tax revenue on 3G delay

 VAT introduction to boost states' tax revenues

 Favours making available food in open market

 Trade gap narrowed to $76.24 bn in April-December.

 Favours monthly ration coupons usable anywhere for poor

 Exports in April-December 2009 down 20.3 per cent

 Imports in April-December 2009 down 23.6 per cent

 Overall approach is to foster "inclusive and green growth promoting fiscal

federalism"

 FRBM Act needs to specify the nature of shocks that would require relaxation of
the targets

 Commission proposes new Fiscal Responsibility and Budgetary Management

(FRBM) Act

 Commission recommends increase in states' share to 32 per cent of Central tax

proceeds from the current level of 30.5 per cent.