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Confederation of Indian Industry

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Title: Confederation of Indian Industry


1
Confederation of Indian Industry
FOCUS INDIA State of the Indian
Economy Presented by Ms Anshula Kant CEO, State
Bank of India, Singapore
2
Key Features of the Indian Economy
  • Robust GDP growth
  • Manufacturing Services are leading the way
  • Growth is Sustainable
  • Growing Externalisation of the Economy
  • India is emerging as a global manufacturing hub
  • Large Population and favorable demographics
  • High Skill-level in Labour force
  • Continuing Economic Reforms


3
Large and Growing Economy (2005-06)
  • GDP Inflation
  • GDP grew by 9.0 to US 738 bn
  • Average Inflation - 4.5.
  • Foreign Trade Reserves
  • Exports grew by 25 to US100.7 billion
  • Imports grew by 36 to US140.2 billion
  • Forex reserves (Feb 07) US 185.0 bn
  • Investment
  • The FDI inflows grew by 37 to US 7.7 billion

4
High GDP Growth ()
5
Sectoral Growth
Source Economic Survey 2006-07
6
Sectoral Growth
Industry Improving Trend in Sectoral Growth ()
Source Economic Survey 2006-07
7
Sectoral Growth
Services Improving Trend in Sectoral Growth ()
Source Economic Survey 2006-07
8
Composition of GDP
GDP Composition Undergoing a Drastic Change
9
Inflation ()

Source Economic Survey 2006-07
10
Per Capita Income
People Getting Richer
Source Economic Survey 2006-07
11
Savings Investment
Rising Savings Investment
Source Economic Survey 2006-07
12
Non Food Credit
Consumption and Investment Moving Northward
13
Corporate Performance
Growth in Sales On a High
Source CMIE
14
Stock Market
Sensex Spiraling up
NSE third largest and BSE fifth largest in terms
of number of transactions in the world
15
Improving Fiscal Situation
Source Economic Survey 2006-07
16
Social Sector
Social Sector Spending Needs to Rise (Centre and
State Government combined- As a of GDP)
Source Economic Survey 2006-07
17
Trade Performance
Impressive Growth in Export and Import ()
Source RBI
18
Growing Externalization
Trade as a of GDP is on a rise
Source Economic Survey 2006-07
19
Foreign Capital Inflows ( US Billion)
Expanding Foreign Investment
7.1 (Nov)
4.0 (April-Aug)
Source RBI
20
Forex Reserves
Rapid Expansion in Foreign Reserve (US Bn)
Source RBI
21
Indias FDI Abroad Rapid Increase
Source RBI
22
India Advantage General
Excellent network of research laboratories
Well-developed base industries
Fast rising middle class and consumption
Proficiency in English
Trained manpower and knowledge base
Low manpower costs
Pro active policy framework
Favorable Demography
23
India Advantage Young
Percentage of Population aged 65 and older
Source WEF
24
India Advantage Favorable Demographics
A strong demand driver
25
India Advantage Growing Knowledge Pool
Source World Bank, World Development Indicator
Report
26
India Advantage High Investors Confidence
FDI Confidence Index 2005 shows India as 2nd most
Favoured destination
Source AT Kearney
27
India Advantage Innovation
28
India Advantage Stable Exchange Rate
29
India Advantage Continuing Economic Reforms
  • Rupee made fully convertible on current account
    since Mar-93
  • Capital Account Convertibility for foreigners and
    NRIs
  • Abolition in Industrial licensing except for a
    few strategic sectors
  • Rationalization of Direct and Indirect taxes
    Implementation of VAT creating ground for GST
  • Removal of all quantitative restrictions on
    imports
  • Greater autonomy for PSUs

30
India Advantage Continuing Economic Reforms
  • Portfolio investments by FIIs allowed both in
    Equity and Debt markets
  • FDI allowed in most sectors including insurance,
    and limits raised in telecom, refining, banking
    and real estate
  • The Fiscal Responsibility and Budget Management
    (FRBM) Act to restrict the fiscal deficit.
  • Banking sector reforms
  • -Entry of private banks
  • -Conditions for foreign banks liberalized
  • Financial sector reforms
  • -RBI Autonomy
  • -Pension Reform Bill
  • -Creation of regulators in stock market,
    insurance sector, telecom etc.

31
Union Budget 2007-08 Snapshots
32
Key Budget Highlights
  • Manufacturing growth rate estimated at 11.3 per
    cent.
  • Saving rate of 32.4 per cent, investment rate of
    33.8 per cent will continue
  • Bank credit grew by 29 per cent during first ten
    months of 2006-07.
  • A number of proposals to perk up agriculture to
    be announced.
  • Outlay on rural infrastructure to increase by
    31.6.
  • Allocation on Healthcare to increase by 21.9 per
    cent.
  • Allocation for education to be enhanced by 34.2
    per cent.
  • Spending on national highway programme increased
    to 106.67 billion rupees for next fiscal year
    from 99.45 billion in previous year.

33
Budget Allocation for Major Sectors
  • Industry
  • Textiles
  • Provision for Scheme for Integrated Textiles
    Parks to increase from US 44.0 mn to US 98.0
    mn
  • Technology Upgradation Fund scheme to continue
    with provision of US 211 mn.
  • Handlooms
  • Additional 100-150 clusters to be taken up in
    2007-08
  • Health insurance scheme to be extended to more
    weavers
  • Allocation for the sector to be enhanced from US
    56.0 mn to US 74.0 mn.
  • Services
  • Tourism
  • Provision for tourist infrastructure to increase
    from US 98.0 mn to US 120 mn.
  • Foreign Trade
  • Merchandise exports expected to cross US125
    billion by the end of the current fiscal.

34
Budget Allocation for Major Sectors
  • Information Technology
  • Allocation for e-governance to increase from US
    91.0 mn to US 166 mn
  • Rs.330 mn to be provided for a new scheme of
    manpower development for software export
    industry.
  • VAT, CST and a Roadmap towards GST
  • Agreement reached with State Governments to phase
    out CST
  • CST Rate to be reduced from 4 to 3 with effect
    from April 1, 2007
  • A roadmap for introducing a national level Goods
    and Services Tax (GST) with effect from April 1,
    2010 to be prepared.
  • Deficits
  • As per the revised estimates (RE) 2006-07, the
    fiscal and revenue deficit as a percentage of GDP
    stood at 3.7 and 2.0 respectively.
  • For 2007-08, the fiscal and revenue deficits as a
    proportion of GDP have been proposed at 3.3 and
    1.5, respectively.

35
Tax Proposals
  • Indirect Taxes
  • Customs duties
  • Peak rate of duty for non-agricultural products
    to be reduced from 12.5 to 10 .
  • To promote research and development, concessional
    rate of 5 duty to be extended to all research
    institutions registered with the Directorate of
    Scientific and Industrial Research
  • Excise Duties
  • Reduction in advalorem component of excise duty
    on petrol and diesel from 8 to 6.
  • Exemption limit for small scale industry (SSI) to
    be raised from Rs.10 mn. to Rs.15 mn.
  • To encourage food processing sector, biscuits
    whose retail sale price does not exceed Rs.50 per
    kilogram and all kinds of food mixes including
    instant mixes to be fully exempt.
  • Service tax
  • Exemption limit for small service providers to be
    raised from Rs. 0.4 mn to Rs. 0.8 mn.
  • Direct Taxes
  • Threshold limit of exemption in the case of all
    assessees to be increased by Rs.10,000 (USD 233 )
  • Surcharge on income tax on all firms and
    companies with a taxable income of Rs. 10 mn or
    less to be removed.
  • Rate of Dividend Distribution Tax to be raised
    from 12.5 to 15 on dividends distributed by
    companies.

36
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