If at first you don't succeed, try, try, again. Then quit. There's no use in being a damn fool about it. — W.C. Fields (1880-1946), American comedian, actor and writer

PMAEC'S ECONOMIC OUTLOOK:
2010-11The Economic Outlook for 2010-11, which was released last week by the Economic Advisory Council to the Prime Minister, has revised the GDP growth upwards to 8.5 per cent, from 8.2 per cent assessed last February. The assessment is lower than 9.4 per cent for calendar year 2010 by the apparently more bullish IMF. At 9.7 per cent, industry is now expected to grow one percentage point faster and services marginally more by 8.9 per cent, whereas agriculture and allied activities are now expected to grow less by 4.5 per cent (5 per cent). The projection for 2011-12 remains at 9 per cent.

The investment rate, which fell to around 35 per cent in the slowdown- hit 2008-09 with a recovery to 36 per cent in 2009-10, is projected to go up to 37 per cent in the current fiscal and touch a decade's high of 38.4 per cent in the next fiscal, the last year of the ongoing 11th plan. Gross fixed capital investment at constant prices, driven by private corporate capex, is expected to expand 12.5 per cent in the current fiscal and a similar measure in the next fiscal. The expected expansion of investment in physical infrastructure, including housing, will drive the construction sector that is projected to expand by 10 per cent in the current fiscal and 11 per cent next year. Reflecting improving disposable income, private final consumption expenditure is expected to rise 6.6 per cent in the current fiscal and 8 per cent in the ensuing fiscal, against a drop to 4.3 per cent in 2008- 09 (from 6.8 per cent in 2007-08).

In external sector, PMEAC expects a current account deficit of $42 billion (2.7 per cent of GDP) in the current fiscal and $51 billion (2.9 per cent of GDP) in the next fiscal. Capital inflows are projected at $73 billion in the current fiscal and $91 billion in the next fiscal. With forex reserves build-up put at around $31 billion and $40 billion respectively in these two years, the external sector is not expected to pose much difficulty in managing exchange rate. Large fiscal deficits and high debt ratios would impede strong economic growth in advance economies in 2010 and to a large extent in 2011. This would call for enhanced domestic demand and increased investment as part of the country's strategy to return to 9 per cent growth trajectory.

Inflation, projected at 6.5 per cent by year-end, will be a major concern. Against the backdrop of inflation rates that are running more than twice the comfort level, monetary policy has to operate with a bias towards tightening. Apart from rationalisation of food and fertiliser subsidies to contain government deficit, controlling inflation, improvement in farm productivity and closing the large physical infrastructure deficit, especially in the power sector, are identified as major issues to be tackled in ensuring a sustainable 9 per cent growth rate.

The EAC is mandated to apprise the PM of important developments at home and abroad and suggest a suitable policy response. Thus, the scholarly-crafted studies containing levelheaded projections and frank and in-depth medium-term analysis and forward looking assessment for two fiscals make them vital inputs for researchers as well as corporate planners.