Indian Economy-report card

Volume - 2 No. -8 1st March ,2011 visit us at : www.imis.ac.in For Private

Circulation only The key challenges are

Editor- in- Chief: • Strong volatility of 2010 will continue in 2011

DR. KISHORE C. PADHY
• Inflation management
Contributing Editor(s):
• Supply side limitations can create high inflation
MS. SUMITA MONDAL
MS. SWETA SAHANI
PGDM(FC)- TERM III • Sustaining the current high levels of current account deficit
Published by the
• Food prices and petrol prices are at high levels
Director on behalf of
Institute of
Management & • Fiscal consolidation target difficult to achieve
Information Science
Swagat Vihar, Bankuala Reforms
Bhubaneswar-751002
Orissa, India • Raise fuel prices
Tel.: +91-674-6542256/
57 • Tighten tax agreements
E-mail:
kcpadhy@imis.ac.in • Strengthen the organized retail

Amartya Sen said private enterprise needs to think big about society.

Inflation Management:

The prime minister stated that he was reluctant to use strong anti-
inflationary measures that might hit economic growth. Money supply
growth is less than 17% almost on par with nominal GDP growth, and that
does not look inflationary. Fiscal policy needs tightening more than
monetary policy. Ever rising subsidies are not the way to tackle inflation.
Cutting subsidies and reducing the fiscal deficit will help.

Tax revenue to revive its share in GDP

According to economic survey for 2010-2011, rising corporate income tax

and service tax collections have boosted the Govt.’s expectations of
increased tax revenues that will give rise to better growth prospects. The
gross tax revenue was expected for 10.8 % of GDP.

Five Odisha PSUs incur Rs. 276cr loss in 2009-2010.

HONDA recalls 58k citys over faulty engine component.

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Great concern for India.

The Indian companies are choosing to invest overseas rather than in India. Indian companies have
turned short of private equity investors acquiring well run companies overseas and leaving them largely
alone to run themselves.

The biggest inclusion opportunity

Allowing easier finance to millions of small enterprises is a faster way of bringing prosperity to the
masses than banking on unwieldy models for financial inclusion. Unleashing the untapped potential of
micro, small and medium enterprises (MSME) by improving their bankability will help in economic
development and progress.

Economic Survey : 2010-11

The Indian economy is set to revert to the pre-crisis growth level of 9.0 percent (+/- 0.25 percent) in
2010-2012. This optimism is based on two factors: i) the new momentum in the saving rate 33.7 % of
GDP and investment rate 36.5 % of GDP. ii) India’s demographic dividend.

Income and wealth inequality

The wealth of the super rich and income of highest paid executives which is 22% of years GDP have
risen faster than GDP growth over several years. One consequence of this is tax collections have risen
twice as fast as national income

Financial Crisis in US

The US financial crisis inquiry commission’s (FCIC’s) report on the financial sector melt down of 2008
says that the principal causes are years of steady deregulation, excessive leverage and failure of credit
rating agencies.

Government and legal cases :

According to one estimate, the government is involved in 10 million cases. No wonder ,the union law
minister and attorney general have described the government as a compulsive litigant.

Management Capability Index

Parameters of management capability developed by AICTE

• Integrity and corporate Governance

• External Relationships

• Application of Technology and knowledge

• Organization Capability

• Performance Leadership

• People Leadership

• Innovation –products and services

• Financial Management

• Visionary & strategic leadership

 • Organisation result and comparative performance

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Railway Budget :

i) The operating ratio improved by over 3% points to 92.1 but appropriation to the
depreciation reserve fund has been cut by 1/4th compared to the budgetary estimate. So
improvement in the operating ratio depicted over the last 2 years is hollow.

ii) The transport sector grows faster than GDP by 1.25 times. Real GDP has grown by 8.6%
but railway revenue grew under 4% during the last 10 months. So the railways are
continuing to lose market share.

iii) Route KM electrified and length of tracks renewed is lower than budgeted for. Only
construction of new lines of budgetary track has been achieved. This is meeting a
political agenda.

Deposit Mobilisation :

Following State Bank of India , smaller banks like Canara Bank, Indian Overseas Bank
and IDBI Bank are paying interest rate more than 10%, 300 basis points higher than what was
budgeted 18 months ago ( A basis point is 0.01 percentage point). IDBI Bank is offering 10% on
1100 days’ deposit for senior citizens; Indian Overseas Bank offering the same rate for 555 days;
Bank of Maharashtra is offering on 444 days. Banks are aggressively competing with each other
to attract real deposits.

Mutual Fund :

MFs will accept subscriptions from foreign investors who meet ‘know your customer’
norms for equity schemes.

ICICI Bank : Financial Inclusion

ICICI bank with partnership with Vodafone and Aircel offers various financial products
including pre paid instruments and credit products for financial inclusion. RBI permits banks to
appoint – for – profit companies as business correspondents.