Indian economy has greater vulnerability to global shocks and economic re-balancing will help in reducing the risks, the >Economic Survey for 2012-13 has said.
Emphasising that India cannot take the external environment for granted, the Survey said the country is exposed to shifts in risk tolerance of global investors. Another external risk is that India’s import bill is strongly tied to the price of oil.
“Globalisation of Indian economy has helped raise growth, it has also meant greater vulnerability to external shocks. A focus on domestic macroeconomic re-balancing will help reduce vulnerability,” said the Economic Survey for 2012-13, which was tabled by Finance Minister P. Chidambaram in Parliament today.
It is unlikely that the support to Indian growth from the global economy would be significant, it added.
“India cannot take the external environment for granted, and has to move quickly to restore domestic balance,” the Survey said.
“The Government is committed to fiscal consolidation. This along with demand compression and augmented agricultural production should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates,” it added.
Global recovery
It also said that global recovery would depend on risks managed from the US fiscal adjustment and euro zone area.
Crisis in the euro zone has become deep, structural and multifaceted, despite several rescue packages over the last two years, posing a major downside risk to the global outlook.