It is always important to have a look at the existing economic condition before assessing the budget. India has achieved nearly 9% economic growth in the manufacturing and services sectors, which are performing well to contribute to this growth. The manufacturing sector's annual growth rate had gone up from 5.1% in 2001-02 to 12.5% in 2006-07, though it has marginally declined to 9.8 % in 2007-08 (Economic Survey 2007-08).
This decline is mainly due to the turndown of consumer and capital goods. Revenue receipts during this period had increased from 8.9% of GDP in 2001-02 to 9.7% of GDP in 2005-06 and was estimated to go up to 10.3% in 2006-07 at the central level (RBI Handbook of Statistics on Indian Economy). In the same time period at the state level, it had increased from 11.2% of GDP to 12% in 2005-06. This improvement was mainly due to direct tax reforms.
Fiscal imbalances are also under control through the implementation of the Fiscal Responsibility and Budget Management (FRBM) Act. The combined gross fiscal deficit had come down from 9.6% of GDP in 2002-03 to 6.6% of GDP in 2005-06. It was estimated to come down further to 5.3% of GDP in 2007-08.
The combined revenue deficit had also come down from 6.6% of the GDP in 2002-03 to 2.6% of the GDP in 2005-06, while it was estimated to come down to 1.2% of GDP in 2007-08 (RBI Handbook of Statistics on Indian Economy, 2007). The total capital inflows had increased from $8,151 mn in 2001-02 to $20,243 mn in 2005-06. During the same period it was observed that the FDI for long-term capital flows had increased from $6,130 mn to $7,751 mn the short-term capital flows FPI which were more volatile in nature had increased from $2,021 mn to $12,492 mn. (RBI Handbook of Statistics on Indian Economy). |
