The Economic Survey has said managing growth and price stability are the major challenges the economy faces. It also called for a return to the low-inflation-sustained high-growth path, through renewed focus on supply-side measures and improved fiscal consolidation, including regular adjustments in domestic energy prices.
The survey cautioned against uncertainty and risks from global crude oil prices, which remain at elevated levels. International crude petroleum prices averaged about $111 a barrel in 2011, compared with $80 a barrel in 2010.
The survey also sought greater attention to asset price bubbles in real estate and stock markets and their implications for the economy and the financial system. There was scope for sharpening the monetary policy and macro-prudential tools to deal with asset bubbles and other such risks, it said.
| INFLATION WOES Though it has eased a bit, inflation in manufactured products and high fuel prices is a big concern | |||
| In % | 2009-10 | 2010-11 | 2011-12 |
| All commodities | 3.8 | 9.6 | 9.1 |
| Primary articles | 12.7 | 18.4 | 9.9 |
| Fuel & power | -2.1 | 12.2 | 13.7 |
| Mfd products | 2.2 | 5.5 | 7.6 |
Wholesale price index-based inflation is expected to fall to 6.5-7 per cent by the end of 2011-12 and moderate further in the months ahead, the survey said.
It called for greater attention to improving supply capacities by speeding private and public investment, rather than demand-side management.
Inflation, after remaining at levels of over nine per cent level through April-November, had seen a sharp fall since December. This was attributed to lower food prices, a global economic slowdown, the impact of nearly two years of rate tightening by the central bank and other measures by the government. Headline inflation fell to 7.74 per cent in December and 6.55 per cent in January, but rose to 6.95 per cent in February, owing to higher food prices.
This easing in inflation reflected the lagged impact of actions taken by the Reserve Bank of India (RBI) and the government. RBI had raised policy rates 13 times since March 2010. In its policy meet on Thursday, it left the repo rate unchanged at 8.5 per cent, and the reverse repo at 7.5 per cent.
January saw deflation in food prices, while in February, food inflation was back to 6.07 per cent, as the high base effect started fading. Consumer price inflation for the major indices declined to below seven per cent in December, and fell further in January.
