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Indian Economic Survey 2011-12 Key Highlights

15 March 2012

The Finance Minister presented the Economic Survey 2011-12 before the Parliament. It is a report card of Indias economic performance which gives the current and expected direction of the Government Policies. The key highlights of the same are given below:

The services sector has continued to play a dominant role in the Indian economy with a 56.3 percent share in the GDP and expected growth rate of 9.4 percent. Savings and investments rate for 2010-11 is 32.3 percent and 35.1 percent respectively with the savings investments gap estimated at 2.8 percent. Foreign exchange reserves were USD 292.8 billion at the end of January 2012 after reaching an all-time high of USD 322 billion in August 2011. The Wholesale Price Index (WPI) remained persistently high and relatively sticky around 9 percent during 2011 due to higher food inflation, global price increase of commodities like metals, chemicals and higher crude oil prices.

State of the Economy and Prospects

The Gross Domestic Product (GDP) growth rate in 2011-12 is expected at 6.9 percent as compared to 8.4 percent in 2010-11. This indicates a slowdown compared not just to the previous two years but from 2003 to 2011 (except 2008-09) with agriculture and services continuing to perform well, Indias slowdown can be attributed almost entirely to weakening of industrial growth. The GDP growth for 2011-12 was projected at around 9 percent, however, the actual GDP growth estimate is only at 6.9 percent. At the same time, sight must not be lost that in comparison to the other economies of the world, India still remains amongst the front runners in the growth rate.

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II State Micro-Foundations of Macroeconomic Developments The growth rate in real GDP is estimated at 6.9
percent in 2011-12. This is expected to grow to 7.6 percent in 2012-13 and 8.6 percent in 2013-14.

The gross Tax-GDP ratio is expected to be at

10.5 percent in 2011-12 (direct tax being 5.9 percent and indirect tax being 4.6 percent) as compared to 10.4 percent in 2010-11 (direct tax being 5.7 percent and indirect tax being 4.7 percent).

Rapid fiscal consolidation proposed to keep the

inflation down and post robust growth. Rapid fiscal consolidation to be achieved by raising tax-GDP ratio and cutting down wasteful expenditures.

For 2011-12, Fiscal, Revenue and Primary

deficits are placed at 4.6 percent, 3.4 percent and 1.6 percent of GDP respectively. The Plan Expenditure has been estimated at INR 4415 billion, equivalent to 5 percent of the GDP.

Infrastructure investment is targeted at USD one

trillion during the Twelfth Five Year Plan 2012-17 with about half of this being raised from the private sector. Government to facilitate private investment by creating enabling atmosphere.

External debt as a percent of GDP is on the

decline and is placed at 3.4 percent in 2011-12 as compared to 3.6 percent in 2010-11.

Gradual movement to granting direct subsidy to poor

which enables them to buy food from market is aimed at.

Growth in the gross tax revenue in the nine

months of April to December 2011 was 12.2 percent (year-on-year). The non-tax revenue declined to 1.4 percent of GDP in the current fiscal year as against 2.9 percent of GDP in 2010-11. Revenue receipts declined by 14.7 percent during the same period.

Emphasis on effort to nurture domestic innovation and an environment for early stage Venture Capital Funds and Angel investors. Directly subsidizing poor by shoring up their income by bank transfer or giving them cash emphasized. Further, a formula based pricing for petrol and subsidy per litre for diesel recommended.

Steps to move away from price controls to be taken.

Corporation taxes grew at merely 6 percent

whereas personal income tax grew at 16 percent.

Growth in Union Excise Duties was merely 8

percent whereas revenue from Service Tax and Customs Duties grew at 30 percent and 15 percent respectively.

Inter-Ministerial Group on inflation recommended an amendment to Agricultural Produce Marketing Committee Act so as to cut down middleman price margin. It further recommended the need of having Foreign Direct Investment (FDI) in the multi-brand retail. fragmented pieces of land from farmers that will boost Indian industry growth rate.

IV Prices and Monetary Management The annual average inflation rate-base on WPI
was 9.91 percent for primary articles, 13.67 percent for fuel and power and 7.58 percent for manufactured products. The annual average WPI inflation for all commodities was 9.11 percent.

A well articulated law should be set up to acquire the

The Economic Survey has suggested that the labour

laws of the country should be modified to give greater freedom to both employers and employees to voluntarily sign contracts which can help the workers freedom and flexibility and at the same time allow the employers to manage their businesses efficiently.

Looking ahead, the key challenges are to ensure continued moderation in inflation, address upward trends in crude prices and manage asset price bubbles in real estate and stock market. Monetary policy remained focused on controlling inflation and anchoring inflationary expectations, with 13 adjustments in policy rates since March 2010, which has slowed growth. The liquidity adjustment facility has cumulatively been increased by 175 basis points (bps) to stand at 8.5 percent and the reverse repo rate by 175 bps to 7.5 percent. In a most recent amendment, the Reserve Bank of India (RBI) lowered the Cash Reserve Ratio by 50 bps to 5.5 percent.

III Fiscal Development and Public Finance With a sharp deceleration in real GDP growth,
particularly in the industry sector and continued high levels of prices in key commodities, a slippage is likely in the deficit targets envisaged at the time of Budget Estimates. With states performing better in overall terms, the combined deficit of the centre and states appears to be on firmer footing, which augurs well for strengthening medium-term macroeconomic prospects.

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V Financial Intermediation and Markets

During the financial year 2011-12, the growth percentages in Scheduled Commercial Banks (SCBs) for bank credit, aggregate deposits and investments were 8.2, 8.9 and 11.8 respectively. While there is year-on-year growth for aggregate deposits and investments, there has been a moderation in the bank credit deposit ratio between March 2011 and December 2011. Amongst the major sectors, the growth of Bank credits in Agriculture, Industry and Wholesale trade has declined vis-a-vis the last year. The total number of Non-Banking Financial Companies (NBFCs) registered with the RBI declined during the current fiscal as a result of exit of many NBFCs from deposit taking activities and consolidation in the sector. As a part of prudential regulations of non-deposit taking NBFCs, a separate category for NBFC-Micro Finance Institution has been created and specific directions have been issued. The ratio of deposits of reporting NBFCs to aggregate deposits of SCBs dropped to 0.21 percent in end-March 2011. The longest bull run in the capital market indices came to a sun set during 2011-12 declining by almost 21 percent. The mean size of Initial Public Offer decreased to INR 1.68 billion for the year 2011-12 as compared to INR 6.71 billion registered during last year. The major policy initiatives undertaken during this fiscal include access for Qualified Foreign Investor to Indian equity market, increase in limit for Foreign Institutional Investors (FII) to invest in Government Securities and Corporate Bonds, liberalising the External Commercial Borrowing (ECB) policy, etc. rates both in life and non-life insurance industries. Insurance penetration (ratio of premium underwritten in a given year to the GDP) increased to 5.1 in 2010 as compared to 2.3 in 2000. The major policy initiatives undertaken by Insurance Regulatory Development Authority include amongst others are portability in health insurance, amendment to Life Insurance Corporation of India Act, 1956, etc.

VI Balance of Payments
The unfolding of the euro zone crisis and uncertainty surrounding the global economy have impacted the Indian economy causing drop in growth, higher Current Account Deficit (CAD) and declining capital inflows. The exports in April 2011 January 2012 registered a growth of 23.5 percent while the imports during the same period recorded 29.4 percent growth. The trade deficit increased by 40.3 percent to USD 148.7 billion during the same period. India with a reserve of USD 296.7 billion at the end of December 2011 is now the sixth largest foreign exchange reserve holder in the world. The rupee exchange rate was very volatile during April - December 2011 reaching a peak of INR 43.94 per USD on 27 July 2011 to an alltime low of INR 54.23 per USD on 15 December 2011. As a result RBI took several measures to augment foreign exchange and curb speculation. Net FDI inflow was higher at USD 35.3 billion during April - December 2011 as compared to USD 16 billion in corresponding preceding period. Net Portfolio investment substantially declined to USD 3.3 billion in April December 2011 from USD 31.3 billion a year earlier. The trade deficit of more than 8 percent of GDP and CAD of more than 3 percent is a sign of growing imbalance in the countrys balance of payments. Key challenges include - to discourage the unproductive imports for restoring the balance, improving the composition of capital flows towards Foreign Direct Investment (FDI), control the rupee volatility and improving the reserves level.

The insurance sector witnessed high annual growth

VII International Trade World trade reached USD 8.7 trillion in first half
of 2011 with value growth of 23.1 percent. However, with the escalating euro crisis, world trade volume growth is estimated to decelerate to 3.8 percent in 2012 as per the International Monetary Funds (IMF), World Economic Outlook.

Key challenges amongst others include liberalising ECB policy while maintaining sustainable level of external debt ratio, financing of Infrastructure development, significant exposure of insurance sector to the banking system and carrying out pension reforms and financial inclusion.

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Indias share in world merchandise export has reached 1.9 percent in January June 2011 as compared to 1.5 percent in 2010. Trade Deficit for April 2011 - January 2012 at USD 148.7 billion was 40.4 percent higher than USD 105.9 billion in April 2010 - January 2011. Challenges in short term could put pressure on stimulus measures and protectionist policy of trading partners. Challenges in the medium to long term include high bilateral trade deficit and a lot more needs to be done in diversification of Indias export basket.

Major challenges include improvement in yield, adoption of farm mechanisation, declining per capita availability of food grains, storage capacity, irrigation facilities, market intelligence and development of food processing industry.

IX Industry
Overall growth during April-December 2011 reached 3.6 percent compared to 8.3 percent in corresponding period of the previous year. Growth moderation in manufacturing sector from 9 percent in April-December 2010 to 3.9 percent in April-December 2011 led to the slowdown in the industry as a whole given its large share in the Index of Industrial Production (IIP). Basic goods segment contributed 65.7 percent and consumer non-durable contributed 28.1 percent to the overall IIP growth. Expenditure growth has outpaced revenue growth leading to a lower growth in net profits which declined in the last 2 quarters. The net profit margin of manufacturing companies measured by the ratio of net profits to sales decelerated continuously from 8.1 percent in Q2 of 2010-11 to 5.4 percent in Q2 of 2011-12 which was the lowest in the last 12 quarters. The manufacturing Gross Capital Formation (GCF) rate declined to 7.1 percent in 2010-11 from 42 percent in 2009-10. The Government released national manufacturing policy to attain sustained growth of 12 to 14 percent in the sector, create 100 million additional jobs, develop appropriate skill sets among rural migrant and urban poor, enhance global competitiveness, etc. In the current year, the rate of growth of credit flow to industries moderated significantly. On year-on-year basis, credit growth to industry decelerated to 19.8 percent in December 2011 from 31.6 percent in December 2010. In respect of global exports of clothing, India ranked 6th largest exporter and in respect of global export of textiles, India ranked 3rd largest exporter, as per WTO.

VIII Agriculture and Food Management

As per 2011-12 advance estimates, agriculture and allied sector accounted for 13.9 percent of the GDP as compared to 14.5 percent of the GDP (agriculture 12.3 percent, forestry 1.4 percent and fisheries 0.7 percent) in 201011. During the current Five Year Plan (2007-12), the agricultural growth is estimated at a rate of 3.28 percent as against the target rate of 4 percent. This is due to severe drought/ deficient rainfall experienced in most part of country during 2009 10 and 201011. As a proportion of the value added by agriculture to GDP, Gross Capital Formation in agriculture and allied sectors rose to 20.1 percent in 2010-11 from 19.8 percent in 2009-10. As per the second advance estimates the food grain production during 2011-12 is estimated to be 250.42 million tonnes as compared to 244.78 million tonnes in 201011 which is mainly due to increase in the production of rice and wheat. India is among 15 leading exporters of agricultural products in the world. As per the International Trade Statistics 2011, published by the World Trade Organization (WTO), Indias agricultural exports amounted to USD 23.2 billion with a 1.7 percent share of world trade in agriculture in 2010. Good quality seed is one of the most important inputs for enhancing agricultural productivity and production. Accordingly, a National Mission on Seeds for the Twelfth Plan Period has been proposed. Further, FDI policy for agricultural sector was amended to allow 100 percent FDI under automatic route for development of seed as compared to the earlier provision of development of seed under controlled condition.

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 During April-November 2011, total output of major

chemicals and petrochemicals increased by 1.77 percent and 2.95 percent respectively.

While world trade in services is dominated by

the developed countries, emerging economies like China and India are now playing an increasing role. India is the most dynamic exporter of services and ranked seventh in the world in both exports and imports of services in 2010.

Food Processing industry has been one of the fastest growing segments in manufacturing sector in the current year contributing 27 percent to the average industrial growth, more than 3 times its weight in the IIP. crude steel during January-November 2011, the consumption of finished steel is estimated to slow down to 6.5 percent for 2011 and 5.4 percent in 2012, as per World Steel Association.

While India ranked the 4th largest producer for

Overall output of the automotive sector increased by 15.5 percent during April-November 2011. Export of all categories of vehicles covering passenger vehicles, commercial vehicles and others increased by 21 percent, 26 percent and 33 percent respectively during April-November 2011. Indian electronic hardware production and export is estimated to have registered a growth of 10 percent and 56 percent (in rupee terms) respectively in 2010-11. Electronics hardware production and exports are expected to be USD 33 billion and over USD 10 billion respectively in 201112. Some of the key challenges in this sector would be to shore up the business sentiment, spur investment, clear bottle necks, formulate policies to resolve issues of availability of land, and forward and backward linkages of manufacturing sectors.

Indias services sector has been resilient even during the tumultuous years of the global economic crisis maintaining a steady growth of around 10 percent. The impact of the global crisis was, however, evident in the trade, hotels, and restaurants and construction categories and with lagged effect in real estate/ownership of dwellings and business services in 2008-09 and 2009-10 and to some extent in banking and insurance in 2009-10. Moving forward in 201112, though there is slight moderation in services growth to 9.4 percent (as also in 2010-11), there is no cause for worry, as it is due to the steep fall in growth of public administration and defence services reflecting fiscal consolidation of the government. Financial and Non-financial services sector attracted highest cumulative FDI flows into India at USD 31.7 billion. The top five source countries for FDI inflows into India are Mauritius, which alone accounts for 39.7 percent of FDI inflows in the service sector, followed by Singapore (15.4 percent), the UK (8.6 percent), USA (7.1 percent) and Japan (4.5 percent). would be with the real estate/ ownership of dwellings and business services segment, the growth of which has started decelerating and construction services growth falling by nearly half. The outlook of the services sector in the domestic economy is linked to the prospects of the sector externally. While software service exports have continued to be steady, the unfolding events in the euro area could lead to some sluggishness in this sector. The fairweather business services exports which have already shown signs of deceleration may not get better.

With hardening of interest rates, the real worry

X Services sector
The services sector has been a major and vital force steadily driving growth in the Indian economy for more than a decade. The economy has successfully navigated the turbulent years of the recent global economic crisis because of the vitality of this sector in the domestic economy and its prominent role in Indias external economic interactions. The share of services in Indias GDP at factor cost (at current prices) increased from 33.5 percent in 1950-51 to 55.1 percent in 2010-11 and to 56.3 percent in 2011-12 as per Advance Estimates.

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Indias services sector is like an uncharted sea with plenty of opportunities and also new challenges. The first challenge is to not only to maintain the present growth tempo in the service sector but also to accelerate it. The second challenge is to make some of the fair-weather services like business and financial services more stable and less vulnerable to external shocks. Addressing the challenges of the diverse sub-sectors of the services sector by better and coordinated strategies can lead to exponential gains for the economy.

Coal registered a negative growth of 2.7 percent as against 8 percent growth in 2009-10. For increasing coal output, 195 net blocks have been allotted till now. Government has approved formation of Special Purpose Vehicle (SPV) for actively pursuing acquisition of coal assets in Australia and Indonesia. The share of railways is envisioned to grow from 1 percent to 3 percent by 2020 and its revenue to grow by 10 percent annually in coming decade. For attracting private capital, a draft policy containing 6 models for specific categories of projects is being finalized and an expert group has been constituted for addressing public private partnerships (PPP) issues for modernization of railways. Upgradation of National Highway and improving ride quality of road network, for which a total outlay of INR 6,113,440 million is budgeted under Twelfth plan wherein the share of the private sectors is projected at 38 percent. Air traffic in India continues to register significant higher rates of growth averaging 18.5 percent in last 7 years. A working group was constituted on 12th December 2011 which recommended that government should rationalize Value Added Tax (VAT) on Aviation Turbine Fuel (ATF) permitting foreign investment in domestic airline and allowing direct import of ATF by airlines. It has been recently decided to allow airlines to import of ATF which would improve their operational economics. The Government is in the process of finalizing the new telecom policy (NTP) draft of which was circulated in 2011 for further comments. NTP is likely to be in place in June 2012. During April to September 2011, a total cargo of 446.1 metric tonnes (MT) was handled reflecting an increase of 4.6 percent from last year. In the Maritime Agenda 2010-20, a target of 3130 MT port capacity has been set for the year 2020. More than 50 percent of this capacity is to be created in the non-major ports as the traffic handled by these ports is expected to increase to 1280 MT. Further, it is estimated that investment required in new projects of major ports will be INR 1,094,494 million of which INR 728,782 million is expected to come from private sector participation.

XI Energy, Infrastructure and Communications

The performance of core industries and infrastructure services sector in power, petroleum refinery, cement, railway freight traffic, domestic air traffic and highways showed improvement in growth whereas sectors like Coal, natural gas, telecom phone connections showed negative growth. It is estimated that investment in infrastructure in the terminal year of the Eleventh Plan would increase by more than 8 percent of the GDP being 2.47 percent higher than Tenth Plan with private sectors contribution at 36 percent. The growth in power generation was 9.2 percent during AprilDecember 2011 as compared to 4.6 percent in the corresponding previous period, with capacity addition during Eleventh plan expected to be 50,000 to 52,000 Mega Watt (MW). For the projected generation capacity addition of 103,300 MW and build transmission and distribution capacity and investment of INR 11,183,750 million is needed. During FY 2011-12 production of crude oil is estimated at 38.19 million metric tonnes (MMT) which is an increase of 1.33 percent, whereas natural gas production during April to December 2011-12 was 36.19 billion cubic metre (BCM) as compared to 39.68 BCM for same period in previous year. In vision 2015 it is envisaged to provide piped gas to more than 200 cities across country and to cover 75 percent population with LPG usage. The government is encouraging national oil companies to aggressively pursue oil and gas opportunities overseas.

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The Planning Commission, in its approach paper has projected an investment of over 45 lakh crore (for about USD1 trillion) during the Twelfth Plan (2012-17). It is projected that at least 50 percent of this investment will come from the private sector as against the 36 percent anticipated in the Eleventh Plan. It is imperative to identify hurdles and weaknesses in regulatory, financing, and incentive structure and project implementation-related issues that may be inhibiting private investment so as to reduce the pressure on public sector funding.

The key challenge for India would be to address the climate change in the spirit of co-operation without compromising its objectives of social and economic development and poverty eradication.

XIII Human Development

India is passing through a phase of unprecedented demographic changes. These demographic changes are likely to contribute to a substantially increased labour force in the country. In absolute numbers, there will be approximately 63.5 million new entrants to the working age group between 2011 and 2016. Further, it is important to note that the bulk of this increase is likely to take place in the relatively younger age group of 20-35 years. Such a trend would make India one of the youngest nations in the world in 2020. By 2020 average working Indian will be 29 years old therefore greater focus on human and inclusive development essential to utilize the demographic dividend. Although as per human development report 2011, human development index (HDI) for India was 0.547 and it ranked 134 out of 187 countries, India has performed better than most countries in terms of annual HDI growth rate at 1.56 in 2010-2011. India scores a value of 0.617 in terms of gender inequality index (global average is 0.492) indicating a high degree of gender discrimination. The Central government expenditure on social services and rural development has gone up from 13.38 percent in 2006-07 to 18.47 percent in 2011-12. Expenditure on social services as a proportion of total expenditure increased from 21.6 percent in 2006-07 to 25 percent in 201112. Government continues to focus on education through various flagship schemes like Sarva Siksha Abhiyan/ Right to Education, Rashtra Madhyamik Shiksha Abhiyaan, National Programme of Mid Day meals, education of girls at elementary level etc. However lot more needs to be done as highlighted in the Annual Status of Education Report particularly improvement in quality of education, enrolment ratio, enhancement of library facilities, improvement in pupil teacher ratio.

XII Sustainable Development and Climate Change

This is a newly inserted chapter in this Economic Survey which reflects the growing challenges of sustainable development and climate change. The Durban meeting in December 2011 has set some directions for appropriate responses to climate change. The Earth Summit in Rio in June 2012 will take stock of sustainable development priorities globally. Both India and the world are reviewing the challenges ahead. In a recent ranking of environmental performance (EPI 2012), India was placed 122 out of 132 countries. The Twelfth Five Year Plan, commencing in April 2012, is setting out Indias priorities for a sustainable and inclusive, lower carbon development path. Various studies indicate that the key sectors in India such as the agriculture, water, natural ecosystem, biodiversity, and health are vulnerable to climate change. These changes are likely to increase the pressure on Indian agriculture in addition to existing stresses of yield stagnation, land use, and competition for land, water and other resources. India which is on the path of development would need access to finance and technology if the world is to achieve emission standards in line with the stabilization and sustainable development goals. In the current scenario, India has two broad channels available for financing climate change i.e. domestic sources like budgetary allocations for various sectors and National Clean Energy Fund fed by cess on coal at INR 50 per ton introduced in 2010; and international sources.

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The literacy rate of the country has improved from 64.83 percent as per 2001 census to 74.04 percent in 2011. The literacy rate in males rose by 6.9 percent from 75.26 percent to 82.14 percent and in females it increased by 11.8 percent from 53.67 percent to 65.46 percent. The government has taken some major initiatives during 2011-12 for promoting technical and higher education such as creation of e-content of various undergraduate and postgraduate courses, creation of online journals and e-books, proposal to set up 20 new Indian Institutes of Information Technology on PPP basis by 2019-20. 12 new projects under support to training and Employment Programme for Women since January 2011 covering 14,225 beneficiaries. The plan outlay for health in 2011-12 is INR 267,600 million. Increase in expenditure on public health, medical expenditure, sanitation and family welfare has increased from INR 530,570 million in 2006-07 to INR 966,720 million in 2010-11. The overall sex ratio has improved from 933 in 2001 to 940 as per 2011 census. The Approach Paper to the Twelfth Five Year Plan (2012-17) rightly stresses the need for more infrastructural investment with the aim of fostering a faster, sustainable and more inclusive growth. It is important to bring in effective measures to improve the efficiency, especially in the delivery mechanism, of all social-sector programmes in the fields of education, health, and employment. Focus should be on planning and implementation strategy in a bottom-up approach which can be achieved by developing and strengthening grassroots level institutions like the Panchayati Raj Institutions. This would help in addressing the issue of convergence of various programmes, schemes and avoid duplication.

GDP growth in advanced economies declined to 1.6 percent in 2011 compared to 3.2 percent in 2010 and is expected to be even lower at 1.2 percent in 2012. Growth in emerging economies slowed to 6.2 percent in 2011 compared to 7.3 percent in 2010 and is projected to be 5.4 percent in 2012. As per the IMF, the global economy is expected to grow by 3.3 percent in 2012 compared to 3.8 percent in 2011. A new dimension of globalization in the post financial crisis world, where easy monetary policy in one set of countries may result in inflation elsewhere due to cross-border capital flows. The IMF has forecast that the eurozone is likely to go through a mild recession in 2012. A slowdown in the eurozone is likely to impact the European Union and the world economy with India being no exception. India figures in the top ten both as an exporter of financial services with a share of 2.4 percent and an importer with a share of 6.7 percent. India has emerged as the fourth largest economy globally with a high growth rate and has also improved its global ranking in terms of per capita income. Indias export (of goods and services) to GDP ratio increased from 6.2 percent in 1990 to 21.5 percent in 2010. Yet India accounts for only 1.5 percent of world exports. The World Bank Study titled Unleashing Indias Innovation (2007) observed that India had increasingly become a top global innovator in hightech products and services. Yet the country is underperforming in terms of its innovation potential and spends less than 0.9 percent of its GDP in the area of research and development (R&D).

XIV India and the Global Economy

This chapter, again a new addition to the Economic Survey, is recognition of Indias arrival on the global scene. It analyses the current global slowdown and eurozone crisis, its impact on India and the policy challenges that these international matters pose on the domestic soil. The chapter also discusses G-20 imperatives and Indias role as a constructive player in the evolving global order.

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India is already too much a part of the global economy and polity; developments in the world will affect India deeply and what India does will affect the world. There is, therefore, a need for India to engage with the world in terms of action and ideas.

Summary
In 2011-12, India found itself in the heart of conflicting challenges such as managing growth and price which at this juncture looks promising for the Indian economy. However, all of these will need to be leveraged to get the full potential out of them. The Indian economy is estimated to grow by 6.9 percent in 2011-12, after having grown at the rate of 8.4 percent in each of the two preceding years. With agriculture and services continuing to perform well, Indias slowdown can be attributed almost entirely to weakening industrial growth. The economic environment, which has been tenuous at best throughout the year, turned sharply adverse in September 2011 owing to the turmoil in the eurozone, and questions about the outlook on the US economy provoked by rating agencies. However, for the Indian economy, the outlook for growth and price stability at this juncture looks more promising. A recently published book notes that India has entered a critical decade. It has emerged as a large and systemically important economy on the global stage. It enjoys the unique advantage of having many economic indicators in its favour, particularly a large domestic market, robust investment-to-GDP ratio, and demographic advantage. It is better for the Indian policy makers to use their perspective as a benchmark and ask what they can do as planners and architects of policy to pull India back to one of the fastest growing economies in the World.

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