ECONOMY CURRENT AFFAIRS MONTHLY 'DECEMBER'

General Awareness Updates – December 2011 Economy & Business The Central Government’s indirect tax collections have gone up by 18.5% to `2.21 lakh crore in the first seven months of 2011-12, prompting the Central Board of Excise and Customs (CBEC) to assert that it would meet the target of garnering `4 lakh crore this fiscal. The excise, custom and service tax collections were `2,21,462 crore during April-October period this year, which constitutes 55.3% of the set target for 2011-12, as per the data released by the CBEC. The indirect tax collection was `1.86 lakh crore in the corresponding period of 2010-11. The excise duty collection increased by 12% in April-October period to `82,680 crore against`73,805 crore in year-ago period, while realisation from the customs increased by about 16.8% to `87,973 crore. The service tax collection jumped by 34.4% to `50,809 crore from`37,799 crore during the first seven months of the fiscal. The CBEC says that the excise and customs duties on petroleum products were not slashed, the indirect tax mop would have been ‘much more’. In June this year, the duties were slashed to provide a cushion against hike in petrol, LPG and kerosene prices that month. The move is estimated to cause an annual loss of `49,000 crore to the exchequer. Continuing its dismal performance, industrial growth fell further to 1.9% in September, mainly due to poor output from the manufacturing sector. Growth in factory output, as measured in terms of the Index of Industrial Production (IIP), stood at 6.1% in September last year. During the April-September period this fiscal, IIP growth stood at 5%, as against 8.2% in the same period last year. Meanwhile, the IIP growth figure for August this year has been revised downward to 3.59% from the provisional estimate of 4.1%. Output of the manufacturing sector, which constitutes over 75% of the index, grew by only 2.1% in September, compared to 6.9% expansion in the same month last year. Mining output declined by (–)5.6 per cent in September this year, as against a growth of 4.3% in the same month last year. Capital goods production witnessed negative growth of (–)6.8% in September in comparison to a growth of 7.2% in the corresponding month of 2010. Growth in production of intermediate goods slowed to 1.5% during the month under review from 4.6% in September, 2010. Consumer non-durables output declined by (–)1.3% during the month in comparison to a growth of 5.8% in the corresponding month of the previous year. However, electricity production improved, witnessing a growth of 9% in September this year, as against growth of a mere 1.8% in September 2010. Consumer durables output grew by 8.7% in September, compared to a growth of 14.2% in the corresponding month last year. India ’s economy grew by 7.7% in the April-June period, the slowest in six quarters. India Inc had attributed the slowdown to rising interest rates, which have led to an increase in the cost ofborrowing, thus hindering fresh investment. The Reserve Bank has hiked interest rates 13 times since March, 2010, to tame inflation, which has been hovering around 9% since December last year. The Central Government has hiked the support price of wheat by `115 per quintal to `1,285 per quintal for the 2012-13 procurement season. The minimum support price (MSP) for wheat was `1,170 per quintal (including the Centre’s bonus of `50 a quintal) in the 2011-12 procurement season (April-June). The support price of other rabi crops such as barley, gram, masur, mustard seed and safflower has also been hiked by up to `700 per quintal. The government raised the MSP of rabi crops in a bid to offset the impact of higher input cost, like the hike in labour wages and increase in fertiliser and electricity prices. The government increased wheat MSP, notwithstanding opposition from ministries of food and finance which had said the hike could lead to a rise in retail prices. India ’s exports grew year-on-year by 10.8% to U.S.$19.9 billion in October while imports expanded at a sharper rate, leaving a big trade deficit of U.S.$19.6 billion. Imports increased by 21.7% to U.S.$39.5 billion in October, according to data released by Commerce Ministry. For the cumulative April-October period, exports aggregated to U.S.$179.8 billion, showing a handsome growth of 46%, thanks to sterling trend witnessed in the previous months of the current fiscal. Imports for the seven-month period stood at U.S.$273.5 billion growing by 31%, while leaving the trade gap of U.S.$93.7 billion. However, the balance of trade is worrying the Commerce Ministry because at this rate it will most likely breach the U.S.$150 billion mark for the fiscal 2011-12.