Advance Estimates of National Income, 2012-13

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the advance estimates of national income at constant (2004-05) and current prices, for the financial year 2012-13.

2.         These advance estimates are based on anticipated level of agricultural and industrial production, analysis of budget estimates of government expenditure and performance of key sectors like, railways, transport other than railways, communication, banking and insurance, available so far. The advance estimates at current prices are derived by estimating the implicit price deflators (IPDs) at sectoral level from the relevant price indices. The salient features of these estimates are detailed below:

I           ADVANCE ESTIMATES OF NATIONAL INCOME, 2012-13

Estimates at Constant (2004-05) Prices

Gross Domestic Product

3.                  Gross Domestic Product (GDP) at factor cost at constant (2004-05) prices in the year 2012-13 is likely to attain a level of Rs.55,03,476 crore, as against the First Revised Estimate of GDP for the year 2011-12 of Rs. 52,43,582 crore, released on 31^st January 2013. The growth in GDP during 2012-13 is estimated at 5.0 per cent as compared to the growth rate of 6.2 per cent in 2011-12.

4.                  The sectors which registered growth rate of over 5 percent are ‘Construction’, ‘trade, hotels, transport and communication`, `financing, insurance, real estate and business services`, and `community, social and personal services`. There may be slow growth in the sectors of ‘agriculture, forestry and fishing’ (1.8%), manufacturing (1.9%) and electricity, gas & water supply (4.9%). The growth in the mining and quarrying sector is estimated to be (0.4%).

Agriculture

5.         The ‘agriculture, forestry and fishing’ sector is likely to show a growth of 1.8 per cent in its GDP during 2012-13, as against the previous year’s growth rate of 3.6 per cent. According to the information furnished by the Department of Agriculture and Cooperation (DAC), which has been used in compiling the estimate of GDP from agriculture in 2012-13, production of foodgrains is expected to decline by 2.8 per cent as compared to growth of 5.2 per cent in the previous agriculture year. The production of cotton and sugarcane is also expected to decline by 4.0 per cent and 6.5 per cent, respectively, in 2012-13. Among the horticultural crops, production of fruits and vegetables is expected to increase by 3.5 per cent during the year 2012-13 as against 5.1 percent in the previous year.

Industry

6.         The manufacturing sector is likely to show a growth of 1.9 per cent in GDP during 2012-13. According to the latest estimates available on the Index of Industrial Production (IIP), the index of manufacturing and electricity registered growth rates of 1.0 per cent and 4.4 per cent, respectively during April-November, 2012-13, as compared to the growth rates of 4.2 per cent and 9.5 per cent in these sectors during April-November, 2011-12. The mining sector is likely to show a growth of 0.4 per cent in 2012-13 as against negative growth of 0.6 per cent during 2011-12. The construction sector is likely to show a growth rate of 5.9 per cent during 2012-13 as against growth of 5.6 per cent in the previous year. The key indicators of construction sector, namely, cement production and steel consumption have registered growth rates of 6.1 per cent and 3.9 per cent, respectively during April-December, 2012-13.

Services

7.         The estimated growth in GDP for the trade, hotels, transport and communication sectors during 2012-13 is placed at 5.2 per cent as against growth of 7.0 percent in the previous year. This is mainly on account of decline of 3.4per cent and 4.8 per cent respectively in passengers and cargo handled in civil aviation and decline of 3.1 per cent in cargo handled at major sea ports during April-November, 2012-13. There has been an increase of 4.3 per cent in stock of telephone connections as on November 2012. The sales of commercial vehicles witnessed an increase of 0.74 per cent per cent in April-December 2012. The sector, `financing, insurance, real estate and business services`, is expected to show a growth rate of 8.6 per cent during 2012-13, on account of 11.1 per cent growth in aggregate deposits and 15.2 per cent growth in bank credit as on December 2012 (against the respective growth rates of 17.2 per cent and 16.0 per cent in the corresponding period of previous year). The growth rate of `community, social and personal services` during 2012-13 is estimated to be 6.8 per cent.

National Income

8.         The net national income (NNI) at factor cost, also known as national income, at 2004-05 prices is likely to be Rs.47,64,819 crore during 2012-13, as against the previous year`s First Revised Estimate of Rs. 45,72,075 crore. In terms of growth rates, the national income registered a growth rate of 4.2 per cent in 2012-13 as against the previous year’s growth rate of 6.1 per cent.

Per Capita Income

9.         The per capita income in real terms (at 2004-05 prices) during 2012-13 is likely to attain a level of Rs.39,143 as compared to the First Revised Estimate for the year 2011-12 of Rs. 38,037. The growth rate in per capita income is estimated at 2.9 per cent during 2012-13, as against the previous year`s estimate of 4.7 per cent.

Estimates at Current Prices

Gross Domestic Product

10.       GDP at factor cost at current prices in the year 2012-13 is likely to attain a level of Rs. 94,61,979 crore, showing a growth rate of 13.3 per cent over the First Revised Estimate of GDP for the year 2011-12 of Rs. 83,53,495 crore.

National Income

11.       The NNI at factor cost at current prices is anticipated to be Rs. 83,68,571 crore during 2012-13, as compared to Rs. 73,99,934 crore during 2011-12, showing a rise of 13.1 per cent.

Per Capita Income

12.       The per capita income at current prices during 2012-13 is estimated to be Rs. 68,747 as compared to Rs. 61,564 during 2011-12, showing a rise of 11.7 per cent.

II         ESTIMATES OF EXPENDITURES ON GDP, 2012-13

13        Alongwith the Advance Estimates of GDP by economic activity, the CSO is also releasing the Advance Estimates of expenditures of the GDP at current and constant (2004-05) prices. These estimates have been compiled using the data on indicators available from the same sources as those used for compiling GDP estimates by economic activity, detailed data available on merchandise trade in respect of imports and exports, balance of payments, and monthly accounts of central government. As various components of expenditure on gross domestic product, namely, consumption expenditure and capital formation, are normally measured at market prices, the discussion in the following paragraphs is in terms of market prices only.

Private Final Consumption Expenditure

14.       Private Final Consumption Expenditure (PFCE) at current prices is estimated at Rs. 57,05,857 crore in 2012-13 as against Rs. 50,56,219 crore in 2011-12. At constant (2004-05) prices, the PFCE is estimated at Rs. 34, 72,980 crore in 2012-13 as against Rs. 33,34,900 crore in 2011-12. In terms of GDP at market prices, the rates of PFCE at current and constant (2004-05) prices during 2012-13 are estimated at 56.9 per cent and 59.7 per cent, respectively, as against the corresponding rates of 56.3 per cent and 59.2 per cent, respectively in 2011-12.

Government Final Consumption Expenditure

15.       Government Final Consumption Expenditure (GFCE) at current prices is estimated at Rs. 11,86,726 crore in 2012-13 as against Rs 10,42,677 crore in 2011-12. At constant (2004-05) prices, the GFCE is estimated at Rs. 6,60,630 crore in 2012-13 as against Rs. 6,34,559 crore in 2011-12. In terms of GDP at market prices, the rates of GFCE at current and constant (2004-05) prices during 2012-13 are estimated at 11.8 per cent and 11.4 per cent, respectively, as against the corresponding rates of 11.6 per cent and 11.3 per cent, respectively in 2011-12.

Gross Fixed Capital Formation

16.       Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs. 29,93,873 crore in 2012-13 as against Rs. 27,49,072 crore in 2011-12. At constant (2004-05) prices, the GFCF is estimated at Rs. 19,44,279 crore in 2012-13 as against Rs.18,97,309 crore in 2011-12. In terms of GDP at market prices, the rates of GFCF at current and constant (2004-05) prices during 2012-13 are estimated at 29.9 per cent and 33.4 per cent, respectively, as against the corresponding rates of 30.6 per cent and 33.7 per cent, respectively in 2011-12. The rates of Change in Stocks and Valuables at current prices during 2012-13 are estimated at 3.0 per cent and 2.4 per cent, respectively.

17.       Estimates of gross/net national product, gross/net domestic product and per capita income, alongwith GDP at factor cost by kind of economic activity and the Expenditures on GDP for the years 2010-11 and 2011-12 and 2012-13, at constant (2004-05) and current prices are given in Statements 1 to 6.

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RBI panel proposes curbs on import of gold

The working group of the central bank on issues related to gold imports and gold loan NBFCs has proposed to limit import of gold into India, which is putting pressure on India’s current account and threatening the country’s sovereign credit ratings. It has also stated that a combination of demand-reduction and supply-management steps and measures to increase monetization of idle stocks of gold need to be put in place. 

The recommendations, if implemented by the government, will make gold costly and enhance the level of disclosure in gold loans business. This could lead to a tougher business environment for gold loan NBFCs.

The group also suggested that under extreme conditions, the government may also think of putting limits on the volume and value of gold to be imported by banks, and imposing export obligation on bulk gold importers.

It’s not only import of the yellow metal, the RBI panel in its report also suggested to the government to take steps that would make it easier for the authorities to track gold buyers, like payment by cheques for purchases above a threshold limit, use of income tax PAN by NBFCs giving loans over Rs 5 lakh and also use of know-your-customer processes for the buyers.

Although the working group stated that gold loan NBFCs are serving social causes, but it suggested that there was no case for granting these NBFCs a status at par with banks, these entities need to be monitored cautiously and their overdependence on banks for funds should be reduced. The RBI group also recommended that India’s idle gold reserves, which is about 20,000 tonnes at present, should be use to set up a gold bank and this reserve could be put into productive use through exchange-traded funds (ETFs).

On the issue of setting up the gold bank, RBI suggested that it may be given “powers to import, export, trade, lend and borrow gold and deal in gold derivatives.” The panel also suggested new ways to channelize investors’ savings into financial assets backed by gold, rather than they directly buying the metal in physical form.

Amendments to Regional Rural Banks (RRBs) Act, 1976

The Union Cabinet today gave its approval to the proposed amendments in the Regional Rural Banks (RRBs) Act, 1976 to enhance authorized and issued capital to strengthen their capital base. The term of the non official directors appointed by the Central Government is proposed to be fixed not exceeding two years. 

The proposed amendments will ensure financial stability of RRBs which will enable them to play a greater role in financial inclusion and meet the credit requirements of rural areas and the Boards of RRBs will be strengthened. 

Background 

Regional Rural Banks (RRBs) were established under Regional Rural Banks Act, 1976 (the RRB Act) to create an alternative channel to the `cooperative credit structure and to ensure sufficient institutional credit for the rural and agriculture sector. RRBs are jointly owned by the Government of India, the concerned State government and sponsor banks, with the issued capital shared in the proportion of 50 percent, 15 percent and 35 percent, respectively. As per provisions of the Regional Rural Banks Act, 1976 the authorized capital of each RRB is Rs. 5 crore and the issued capital is a maximum Rs. 1 crore. 

First Revised Estimates of National Income, Consumption Expenditure, Saving and Capital Formation, 2011-12

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the First Revised estimates of National Income, Consumption Expenditure, Saving and Capital Formation for the financial year 2011-12 along with the Second Revised Estimates for the year 2010-11 and Third Revised Estimates for the year 2009-10. As per the revision policy^#1, the First Revised Estimates for the year 2011-12 (earlier called Quick Estimates) have been compiled using industry-wise/institution-wise detailed information instead of the benchmark indicator method.

The estimates of Gross Domestic Product and other aggregates for the years 2009-10 and 2010-11 have been revised on account of use of latest available data on agricultural production, industrial production especially Annual Survey of Industries 2010-11 in lieu of the Index of Industrial Production, government expenditure (replacing Revised Estimates with Actuals for the year 2010-11) and also detailed and more comprehensive data available from various source agencies like Reserve Bank of India and State Directorate of Economics and Statistics.

The salient features of the estimates at aggregate level, which are based on latest available information, are indicated below:

GROSS DOMESTIC PRODUCT AND GROSS NATIONAL INCOME

Gross Domestic Product (GDP) at factor cost at constant (2004-05) prices in 2011-12 is estimated at ` 52,43,582 crore as against ` 49,37,006 crore in 2010-11 registering a growth of 6.2 per cent during the year as against a growth of 9.3 per cent in the year 2010-11. At current prices, GDP in 2011-12 is estimated at ` 83,53,495 crore as against ` 72,66,967 crore in 2010-11, showing an increase of 15.0 per cent during the year, as against an increase of 19.0 per cent in the previous year.

At constant (2004-05) prices, the Gross National Income at factor cost in 2011-12 is estimated at ` 51,96,848 crore as against` 48,82,249 crore in 2010-11 showing a rise of 6.4 per cent during the year, as against an increase of 8.8 per cent in the previous year. At current prices, the Gross National Income in 2011-12 is estimated at ` 82,76,665 crore as compared to `71,85,160 crore in 2010-11, showing a rise of 15.2 per cent during the year, as against an increase of 18.4 per cent in the previous year.

The growth rate of 6.2 per cent in the GDP during 2011-12 has been achieved due to growth in financing, insurance, real estate & business services (11.7%), transport, storage and communication (8.4%), electricity, gas & water supply (6.5%) and trade, hotels & restaurants (6.2%). At constant prices, the primary sector, i.e. agriculture, forestry & fishing has shown a growth of 3.6 per cent during 2011-12 as against 7.9 per cent during the year 2010-11. The growth of secondary sector is 3.5 per cent and that of service sector is 8.2 per cent during 2011-12, as against a growth of 9.2 per cent and 9.8 per cent, respectively, in the previous year.

Gross Domestic Product (GDP) at market prices at constant (2004-05) prices in 2011-12 is estimated at ` 56,31,379 crore as against ` 52,96,108 crore in 2010-11 registering a growth of 6.3 per cent during the year as against a growth of 10.5 per cent in the year 2010-11. At current prices, GDP at market prices in 2011-12 is estimated at ` 89,74,947 crore as against ` 77,95,314 crore in 2010-11, showing an increase of 15.1 per cent during the year, as against an increase of 20.3 per cent in the previous year.

CONSUMPTION EXPENDITURE, SAVING AND CAPITAL FORMATION

As various components of expenditure on Gross Domestic Product, namely, Consumption Expenditure and Capital Formation, are normally measured at market prices, the discussion in the following paragraphs is in terms of market prices.

PRIVATE FINAL CONSUMPTION EXPENDITURE

Private Final Consumption Expenditure (PFCE) at current prices is estimated at ` 50,56,219 crore in 2011-12 as against `43,49,889 crore in 2010-11. At constant (2004-05) prices, the PFCE is estimated at ` 33,34,900 crore in 2011-12 as against `30,88,880 crore in 2010-11. In

terms of GDP at market prices, the rates of PFCE at current and constant (2004-05) prices during 2011-12 are estimated at 56.3 per cent and 59.2 per cent, respectively, as against the corresponding rates of 55.8 per cent and 58.3 per cent, respectively in 2010-11.

DOMESTIC SAVING

Gross Domestic Saving (GDS) at current prices in 2011-12 is estimated at ` 27,65,291 crore as against ` 26,51,934 crore in 2010-11, constituting 30.8% of GDP at market prices as against 34.0% in the previous year. The decrease in the rate of GDS has mainly been due to the decrease in the rates of financial savings of household sector from 10.4% to 8.0%, private

corporate sector from 7.9% to 7.2% and that of public sector from 2.6% to 1.3% in 2011-12 as compared to 2010-11. In absolute terms, the saving of the household sector has increased from ` 18,32,901 crore in 2010-11 to ` 20,03,720 crore in 2011-12, increasing by 9.3% during the year. The saving of private corporate sector has gone up by 4.1% from ` 6,19,370 crore in 2010-11 to ` 6,44,473 crore in 2011-12 . However the saving of public sector has gone down by 41.4% from ` 1,99,662 crore in 2010-11 to ` 1,17,097 crore in 2011-12.

CAPITAL FORMATION

Gross Domestic Capital Formation has increased from ` 28,71,649 crore in 2010-11 to ` 31,41,465 crore in 2011-12 at current prices and it increased from ` 21,20,377 crore in 2010-11 to ` 21,31,839 crore in 2011-12 at constant (2004-05) prices. The rate of Gross Capital Formation at current prices is 35.0 per cent in 2011-12 as against 36.8 per cent in 2010-11. The rate of Gross Capital Formation at constant (2004-05) prices is 37.9 per cent in 2011-12 as against 40.0 per cent in 2010-11.

Within the Gross Capital Formation at current prices, the Gross Fixed Capital Formation amounted to ` 27,49,072 crore in 2011-12 as against ` 24,74,464 crore in 2010-11, increasing by 11.1% during the year. At current prices, the Gross Fixed Capital Formation of the public sector has increased by 9.3% from ` 6,06,245 crore in 2010-11 to ` 6,62,698 crore in 2011-12, that of private corporate sector by 1.0% from ` 8,58,558 crore in 2010-11 to ` 8,67,020 crore in 2011-12, and the household sector by 20.7% from ` 10,09,662 crore in 2010-11 to ` 12,19,354 crore in 2011-12.

The change in stocks of inventories, measured as additions to stocks decreased by 22.7% at current prices, from ` 2,45,113crore in 2010-11 to ` 1,89,384 crore in 2011-12. The decrease is observed due to decrease in change in stocks of public and private corporate sector.

ESTIMATES AT PER CAPITA LEVEL

The per capita income (per capita Net National Income at factor cost) in real terms, i.e. at 2004-05 prices, is estimated at `38,037 for 2011-12 as against ` 36,342 in 2010-11, registering an increase of 4.7 per cent during the year, as against an increase of 7.2% during the previous year.

The per capita income at current prices is estimated at ` 61,564 in 2011-12 as against ` 54,151 for the previous year depicting a growth of 13.7 per cent, as against an increase of 17.1% during the previous year.

The per capita PFCE at current prices in 2011-12 is estimated to be ` 42,065 as against ` 36,677 in the year 2010-11, showing an increase of 14.7% as against an increase of 15.7% in the previous year. The corresponding estimates at constant (2004-05) prices are ` 27,745 and ` 26,045, registering an increase of 6.5% in 2011-12, as against an increase of 7.1% in the previous year.

The estimates of National Product, Consumption Expenditure, Saving and Capital Formation at aggregate and per capita levels for the years 2004-05 to 2011-12 are presented in Statement 1 and the detailed estimates at industry/item level in Statements 2 to 8. The statements on Income & Outlay Account and Capital Finance Account of the Administrative Departments, as also the Price and Quantum Indices are available on the website of the Ministry, www.mospi.gov.in.

# As available on www.mospi.gov.in

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42% workers are now ‘middle-class’: ILO report

The middle class is rising in a big way, especially in developing countries. About 42 per cent of workers, or nearly 1.1 billion, are now ‘middle-class’, living with families on over Rs 225 ($4-13) per person per day, says a new ILO report.

By 2017, the developing world could see the addition of 390 million more workers in the middle class, the International Labour Organisation (ILO) report says.

“Over time, this emerging middle-class could give a much needed push to more balanced global growth by boosting consumption, particularly in poorer parts of the developing world,” said Steven Kapsos, one of the authors of the Global Employment Trends 2013.

Employment growth

However, the report raises a red flag for employment growth in 2013-14, even if there is a moderate pick-up in output growth.

It estimates that the number of unemployed worldwide may rise by 5.1 million to more than 202 million in 2013 and by another 3 million in 2014, half-a-million of which will be youth.

“The indecision of policy-makers in several countries has led to uncertainty about future conditions and reinforced corporate tendencies to increase cash holdings or pay dividends rather than expand capacity and hire new workers,” says the report.

GDP growth

The ILO report noted that in India, growth in investment contributed 1.5 percentage points to the overall GDP growth over the past year, down from 1.8 percentage points in 2011, while the contribution from consumption declined to 2.8 per cent versus 3.2 per cent the previous year.

Job creation, labour productivity

For countries such as India, the report called for focus on both employment creation and labour productivity.

It noted that in India, even where jobs were created, a large number of workers remained in agriculture (51.1 per cent), in the urban informal sector or in unprotected jobs (contract) in the formal sector.

The share of workers in manufacturing was just 11 per cent in 2009-10, no higher than a decade earlier.

Like many regions, growth has failed to deliver a significant number of better jobs in the formal economy.

Formal employment

Most notably in India, the share of formal employment has declined from around 9 per cent in 1999-2000 to 7 per cent in 2009-10, in spite of record growth rates, it said quoting a study.

Using a comparable definition for the latest year available, the report said the share of workers in informal employment in the non-agricultural sector stood at 83.6 per cent in India (2009-10), 78.4 per cent in Pakistan (2009-10) and 62.1 per cent in Sri Lanka (2009).

Significantly, the report noted that unemployment rates increased rapidly for high-skilled workers, especially women.

“Indians with a diploma suffer particularly, with unemployment rates reaching 34.5 per cent for women and 18.9 per cent for men during 2009-2010,” it added.

RBI hikes FII limit in Govt securities, corporate bonds by $5 billion

The Reserve Bank today hiked FII investment limits in Government securities and corporate bonds by $5 billion each, taking the total cap in domestic debt to $75 billion, with a view to bridging the current account deficit.

Further liberalising the norms, the three-year lock-in period for foreign institutional investors (FIIs) purchasing Government securities (G-Secs) for the first time has been done away with, RBI said.

The sub-limit of $10 billion for investment by FIIs and long-term investors in G-Secs stands enhanced by $5 billion, it said.

The limit in corporate debt, other than infrastructure sector, stands enhanced from $20 billion to $25 billion, RBI said.

With an increase of $5 billion in each of the two categories, FIIs and long-term investors can now invest $25 billion in G-Secs and $50 billion in corporate debt instruments, taking the total to $75 billion.

The earlier FII investment limit in G-Secs was $20 billion and for corporate debt it was $45 billion, including a sub-limit of $25 billion for infra bonds.

RBI further said: “Residual maturity condition shall not be applicable for the entire sub-limit (in G-Secs) of $15 billion but such investments will not be allowed in short-term paper like Treasury Bills, as hitherto”.

The overall FII limit of domestic debt is distributed through a host of categories across Government, corporate and infrastructure debt.

Long-term investors include sovereign wealth funds, multilateral agencies, pension funds and foreign central banks.

Government, which is battling a high current account deficit (CAD) — the gap between inflows and outflows of foreign funds — is trying to attract more foreign funds into the country.

The CAD touched a record high of 5.4 per cent in the July-September quarter of the current fiscal.

In order to check the outflow of foreign currency, the Government recently hiked the import duty on gold and also took steps to encourage mutual funds to park their gold in deposit schemes offered by banks.

As a measure of further relaxation, the RBI added that it had dispensed with the one-year lock-in period on holding infrastructure bonds.

Developing nations top global FDI index for first time in 2012: UN

Developing countries overtook their traditionally wealthier counterparts in attracting foreign direct investment for the first time last year, as industrialised nations bore the brunt of an 18 per cent plunge in FDI flows, the UN’s trade and investment think tank Unctad has said.

Last year, global foreign direct investments — when a company in one country invests for instance in production facilities or buys a business in another country — came in at $1.3 trillion, down from $1.6 trillion in 2011, Unctad’s Global Investment Trend Monitor showed.

In a dramatic shift on the global investment scale, developing countries reaped $680 billion of that, or 52 per cent of the total.

“For the first time in history, developing countries have attracted more investment than developed countries,” James Zhan, who heads UNCTAD’s investment and enterprise division, told reporters in Geneva.

The shift was largely prompted by evaporating investments in crisis-hit developed economies like the United States, European nations and Japan, which accounted for 90 per cent of the $300 billion-decline in global FDI last year, Zahn said.

“We thought we were on the way to a steady recovery, (but) the recovery has derailed,” added Zahn, who pointed out that global investment figures had turned upwards in 2010 and 2011. But amid growing market uncertainty, they fell last year to near the historic low of $1.2 trillion which came during the worst of the global financial crisis in 2009.

The US, which remains the world’s largest recipient of foreign direct investment, saw its FDI inflows slip more than 35 per cent to $147 billion, while Germany saw its net investment level plunge from $40 billion in 2011 to just $1.3 billion last year, mainly due to large divestments there.

“Developing countries also suffered from the global decline,” Zhan said, “but the decline was much more moderate.”

Asia, which raked in 59 per cent of all FDI to developing countries, saw its inflows dip 9.5 per cent, with China, the world’s second-largest recipient of such investments, registering a 3.4-per cent drop in 2012 to $120 billion.

South America and Africa meanwhile registered positive growth in FDI flows last year.

Last year’s overall drop in investments came despite the fact that the global economy grew 2.3 per cent in 2012, while worldwide trade was up 3.2 per cent.

Going forward, Unctad expects FDI flows to rise to just $1.4 trillion this year and to $1.6 trillion in 2014 — still far below the 2007 pre-crisis level of some $2.0 trillion in investments.

IMF: World Economic Growth Rate would be 3.5 percent in 2013

nternational Monetary Fund (IMF) in at update to World Economic Outlook (WEO) on 23 January 2013, projected that the global economic growth rate would be 3.5 percent in 2013. The update mentioned that the global economic growth would strengthen gradually as the limitations of the economic activities have seen a positive note with the start of the year.

Some of the major projections of IMF are

•    Global growth would reach 3.5 percent in 2013, from 3.2 percent in 2012
•    Crisis risks would narrow down but the downside risks will remain crucial
•    Main sources of growth would be the emerging markets, developing countries and the United States

Reasons that may be beneficial in betterment of the economic growth

•    The actions taken in policy making have been responsible in reducing the risk of the acute crisis situation faced in the area and the United States.
•    Actions in terms of plans taken by Japan would also be beneficial in pulling it out from a short-lived recession kind of condition.
•    The policies made by the emerging economies of the world in terms of policy making is has also shown positive outcomes with a good start in the year

The report also described that if the risks of crisis doesn’t materialize, then the expected targets of growth may be crossed and can be stronger then that is projected.

Thing that can show an impact, the growth or result into the downfall

•    Fiscal tightening, if crosses an excessive limit in United States it may have an adverse impact on the economic growth
•    Long-term stagnation of the euro-area would also have an adverse impact

Situations that hinted towards improvement in economic conditions

The economic conditions of the world had shown a positive movement in the third quarter of the 2012 and this was change brought by the performance displayed on the economic front by the emerging economies of the world as well as United States. The borrowing cost of the countries in Euro Zone was marginally better than expected but it also identified some of the weaknesses in the core Euro area. Japan was under the effect of recession in the second half of 2012, which had shown positive signs of improvement in the running year.

Forecasts and the Expected Changes

•    In terms of Euro Zone, IMF managed to downgrade its forecast as this economic situation of the region may contract a bit n 2013.
•    The report also observed slight improvement in the financial conditions of the banks and governments of the Periphery economies, occurred due to the policy actions undertaken by them but these economies has yet not improved in terms of the borrowing conditions in private sector.
•    In terms of United States, the forecast remained broadly unchanged to that of the of October 2012 WEO to 2 percent, but predicted that the support offered to the financial market would support the growth in consumption in the country
•    In terms of Japan, the near-term outlook has also remained unchanged regardless of the recession witnessed by the country in recent past and it’s expected that the monetary easing and incentive package would boost the growth in the country
•    The report projected that the developing economies and the emerging market of the world would grow by 5.5 percent in 2013 and it will remain almost same as it was predicted in October 2012 WEO.
•    In case of China, the IMF has forecasted a growth rate of 7.8 percent, 8.2 percent and 8.5 percent in 2012, 2013 and 2014 respectively. In 2011, it witnessed a growth rate of 9.3 percent.

Findings of the report and threats

•    Following the findings of the report in detail, it’s projected that the Euro Area is one of the biggest threat to the Global Economic Outlook as it poses a downside risk to the economy. If the momentum of reforms is not maintained in the Euro Area than the risk of prolonged stagnation would increase
•   To move ahead of the risk factor, adjustment programs from the periphery countries should continue and be supported by the firewall developments for prevention of the contagion and take steps towards banking union and fiscal integration, the report stated.
•   In case of United States, excessive fiscal consolidation in short term should be avoided and it should raise the debt ceiling and should move ahead to identify a credible medium-term fiscal consolidation plan, that focuses towards entitlement and tax reform.
•    In context of Japan, the report identified that it should find out a medium-term fiscal strategy as lack of such an strategy can bring risks to the stimulus package to it
•  The developing nations and emerging economies need to make fine policies to tackle the of rising domestic imbalances

The overall decrease in the forecast for the global economic growth rate is the result of the economic slowdown witnessed by the world due to the Euro Zone Crisis in existence. The Euro Zone crisis had an adverse impact on the export and import of the world, leading to great set-backs to the emerging economies of the world as well as the developed economies. Before, Euro Crisis the world also suffered from the recession that hit the United States of America in 2009. Japan also witnessed an economic slowdown after the Tsunami that hit the country in 2011 and affected the Fukushima nuclear Plant.

IMF forecasted Indian Economic Growth Rate to be 5.9 percent in 2013

The International Monetary Fund (IMF) on 23 January 2013 projected that the economic growth rate of India in 2013 would be 5.9 percent. The IMF also projected an increased growth rate of 6.4 percent for 2014 looking forward towards the gradual strengthening of the global expansion in India’s context.

In its update at the World Economic Forum (WEO), the IMF also forecasted that the global economic growth rate would be 3.5 percent, little higher than the 3.2 percent estimated earlier. As per the report of IMF, uncertainty in policy making and supply bottlenecks were one of the most visible causes that hampered the growth aspects of the economies like India and Brazil. It also stated that the scopes of easing the policy to any further extent have also gone down in these countries.

About International Monetary Fund (IMF)  

The International Monetary Fund (IMF) is an organization of 188 countries that works for fostering the global monetary cooperation, promote high employment and sustainable economic growth, facilitate international trade, secure financial stability and reduce poverty around the world. Since the end of World War II, the IMF had been playing a major role in shaping the global economy. The IMF has played a part in shaping the global economy.