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As inflation is brought under control, peoples’ appetite for gold will also diminish. Maintaining an attractive return in financial assets will also help in bringing down the demand of gold.

23 Apr 2013

NEW DELHI (Commodity Online): In India's ‘Review of the Economy 2012-13' brought out by the nation's Economic Advisory Council to the Prime Minister, it is projected that the country would grow at the rate of 6.4% in 2013-14.

Growth and, more particularly, industrial growth has slowed. But the decline appears to have bottomed out, report noted. The projected growth exceeds 5% growth registered last year.

In expectation of normal or mostly normal monsoon, the farm sector growth is likely to improve and is projected to grow at 3.5% in 2013-14.

Industrial growth is projected at 4.9% in 2013-14 even as manufacturing sector is projected to grow at 4% in 2013-14. Meanwhile, the service sector is expected to grow at 7.7% in 2013-14.

Global growth although projected to pick up in 2013 would continue to remain at modest levels. “In such a scenario India’s projected growth rate of 6.4% is relatively high and respectable,” the report said.

Current Account Deficit

Meanwhile, the nation's Current Account Deficit is estimated to be $94 billion (5.1% of GDP) in 2012-13 and is projected to be $100 billion (4.7% of GDP) in 2013-14. Merchandise trade deficit is estimated to be $200 billion (10.9% of the GDP) in 2012-13 and is projected to be $213 billion (9.9% of GDP) in 2013-14.

Net invisibles earnings are estimated to be $105.8 billion (5.7 % of GDP) in 2012-13 and are projected to be $113 billion (5.3 % of GDP) in 2013-14.

Net oil imports and gold, account for bulk of the increase in merchandise trade deficit. Price and subsidy reforms in petroleum products need to be completed to control our oil import bill.

It is also vitally necessary to encourage exports of both merchandise and services.

As inflation is brought under control, peoples’ appetite for gold will also diminish. Maintaining an attractive return in financial assets will also help in bringing down the demand of gold.

The report acknowledged that there is a close link between India's dependence on imports of oil and natural gas and India's external payments situation.

Hence, steps should be taken to improve the energy economy in all aspects-production, transformation and final use. Facilitating an increase in domestic coal production will make a substantial difference.

The conditions for exploration and production of hydrocarbons must be improved to increase domestic supply.

Inflation

In 2013-14, the headline WPI inflation is expected to be around 6.0 %, with primary food inflation around 8%, fuel at about 11% and manufactured goods at around 4%. The provisional figure for inflation at the end of 2012-13 is 5.96%.

Both supply side management and the approach to administered pricing have to be informed about the urgency in regard to stabilizing primary food inflation at a lower level.

Dr. C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister released the document ‘Review of the Economy 2012-13’ at a Press Conference in New Delhi on Tuesday.


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