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Highlights
New Delhi : July 2, 2009
ECONOMIC SURVEY
2008-09
· Economic growth decelerates to 6.7 per cent in 2008-09 compared to 9 per cent in 2007-08 and 9.7 per cent in 2006-07.
· Per capita growth at 4.6 per cent.
· Deceleration in growth spread across all sectors except mining and quarrying; agriculture growth falls from 4.9 per cent in 2007-08 to 1.6 per cent 2008-09.
· Manufacturing grows at 2.4 per cent, slowdown attributed to fall in exports and a decline in domestic demand.
· Global financial meltdown and economic recession in developed economics major factors in India's economic slowdown.
· Investment remains relatively buoyant, ratio of fixed investment to GDP increased to 32.2 per cent in 2008-09 compared to 31.6 per cent in 2007-08.
· Fiscal deficit to GDP ratio stands at 6.2 per cent.
· Credit growth declines in the later part of 2008-09 reflecting slowdown of the economy in general and the industrial sector in particular.
· Increased plan expenditure, reduction in indirect taxes, sector specific measures for textile, housing, infrastructure through stimulus packages provides support to the real economy.
· Merchandise export grows at a modest 3.6 per cent in US Dollar terms while overall import growth pegged at 14.4 per cent.
· A large domestic market, resilient banking system and a policy of gradual liberalisation of capital account to help early mitigation of the adverse effect of global financial crisis and recession.
· Sharp dip in the growth of private consumption a major concern at this stage.
· Medium to long-term capital flows likely to be lower as long as the de-leveraging process continues in the US economy.
· Revisiting the agenda of pending economic reforms imperative to renew the growth momentum.
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DNM/BS/spandey/(Economic Survey 2009-1
Press Information Bureau
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Summary of Economic Survey 2008-09
New Delhi : July 2, 2009
ECONOMIC SURVEY
2008-09
The Economic Survey 2008-09 presented to Parliament today by the Finance Minister Shri Pranab Mukherjee says, the speed at which the Indian economy returns to the high growth path in the short term depends on the revival of the economy, particularly the US economy and the Government's capacity to push some critical policy reforms in the coming months. It says, if the US economy bottoms out by September 2009 there would be good possibility for the Indian economy repeating its 2008-09 performance i.e. around 7.0 +/- 0.75 per cent in the fiscal 2009-10 (assuming a normal monsoon). However, in the event of a more prolonged external economic downturn, the revival of the global economy/US economy being delayed until 2010, the growth may moderate to the lower end of the range.
It says the recovery is likely to be assisted by the likely developments in the external sectors. The declining trend in trade deficit suggests that with reasonable invisible account surplus, which has been an attribute of Indian economy for the last several years economy may end up with a current account surplus of 0.3 to 2.8 per cent of GDP in 2009-10.
The Survey says, the prospects of Indian economy are somewhat different from most other countries. A large domestic market, resilient banking system and a policy of gradual liberalisation of capital account have been key factors. The Survey says a major concern at this stage though not entirely unexpected is a sharp dip in the growth of private consumption. Four factors seem to have contributed to this slowdown. First, it could be due to the wealth effect, resulting from decline in the equity/property prices. Secondly, the uncertainty in the labour market and some decline in employment. Thirdly, cutbacks in consumer credit by private banks, NBFCs and other lenders. Fourthly, during slowdown a dominance of precautionary motive may induce consumer to either defer their spending decisions or shift to unbranded alternatives.
The Survey goes on to note that there are early signs of recovery in the global economy manifested in rising stock prices and increasing price of commodities. It is however, debatable whether rising prices are an indication of green shoots of recovery or a result of position taken by financial investors seeking to benefit from global recovery expectations. It says, though the financial crisis and the transmission of its impact on the real economy is now better understood and global financial conditions have shown improvement over the recent months, uncertainty related to the revival of the global economy remain. That makes it difficult to forecast the short-to-medium term growth prospects of the Indian economy.
The Survey says to counter the negative fall out of the global slowdown on the Indian economy, the Government responded by providing substantial fiscal expansion in the form of tax relief to boost demand and increased expenditure on public assets. The net result was an increase in fiscal deficit from 2.7 per cent in 2007-08 to 6.2 per cent of GDP in 2008-09. The difference between the actuals of 2007-08 and 2008-09 constituted the total fiscal stimulus not withstanding that some expenditure was on account of implementation of the Sixth Pay Commission Award and the Agriculture Debt Relief Scheme announced in 2008-09 Budget.
It says despite the slowdown in growth, investment remained relatively buoyant growing at a rate higher than at the rate of the GDP. The ratio of the fixed investment to GDP consequently increased to 32.2 per cent in 2008-09 from 31.6 per cent in 2007-08. This reflects the resilience of Indian enterprise, in the face of massive increase in global uncertainty and risk aversion and freezing of highly developed financial markets. Domestic food price inflation as measured by the Wholesale Price Index (WPI) food sub index, though declining remains much higher than overall inflation.
The Survey expresses concern over the existence of hunger and widespread malnutrition despite the country achieving self-sufficiency in food production and with mounting public food stocks at its command. It says it is time that various interventions at the State and Central level addressing these issues are reviewed and redesigned.
The Survey says that India continues to retain its position as a preferred destination for investments. A recent study by UNCTAD found that India achieved a growth of 85.1 per cent in foreign direct investment flows in 2008, the highest increase across all countries. According to the study FDI investments into India went up from US Dollar 25.1 billion in 2007 to US Dollar 46.5 billion in 2008, even as global flows decline from US Dollar 1.9 trillion to US Dollar 1.7 trillion during the period.
While fiscal policy plays a dual role as a short-term counter-cyclical tool and an instrument to maintain microeconomic stability and promote growth in the medium term, the Economic Survey underlines the need to restore Centre's fiscal deficit to the FRBM target of 3 per cent of GDP at the earliest. It says a number of factors will make it possible. They include reversal of much of the decline in business and corporate tax collections when growth accelerates from the second half of the year and the expected introduction of GST in 2010-11. On the monetary policy front the Survey says that high deposit rates have now come in the way of cutting lending rates at a pace which is consistent with the current outlook on inflation and the need for stimulating investment demands.
Reflecting on the high oil and other energy prices, the Survey says that as long as domestic prices remained below the cost of imports, demand would continue to grow, accentuating the negative impact of the terms of trade effect on national income. Referring to the volatility of global oil prices, it says, the fall could be a temporary respite and provides a golden opportunity to reform the pricing and control system. It says that as the low prices of oil has provided a temporary window for decontrol of petrol and diesel, this window must be utilised at the earliest. Other elements of energy policy such as open access to power, decontrol of coal also need to be addressed to have a viable long-term solution to our dependence on foreign oil and the debilitating effect of power failure.
The Survey says although the economy continues to face wide ranging challenges-the Indian economy has shock absorbers that will facilitate early revival of growth. The banks are financially sound and well capitalised, foreign exchange position remains comfortable and the external debt position has been within comfortable zone. The rate of inflation provides a degree of comfort on the cost side for the production sectors. Agriculture and rural demand continues to be strong and agricultural prospects are normal. The Survey says while there are indications that the economy may have weathered the worst of the downturn, the situation warrants close watch on various economic indicators including the impact of the economic stimulus and developments taking place in the international economy. Taking policy measures that squarely address the short and long term challenges would achieve tangible progress and ensure that the outlook for the economy remains firmly positive.
DNM/BS /spandey/(Economic Survey 2009-1
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Government focusses on Strengthening of primary health infrastructure and
improving service delivery
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
The National Rural Health Mission(NRHM) seeks to strengthen the public health delivery system at all levels in the country. It is being operationalised throughout the country. The Economic Survey for 2008-09 tabled in Parliament today states that as part of the NRHM 6.49 lakh ASHAs and link workers have been selected upto December 2008 out of which 5,63 lakh have been given orientation training and 4.12 ASHAs have drug kits. Strengthening of the PHCs for 24x7 services is a priority of the NRHM. Of the 22,370 PHCs in the country, only 1,263 of them were working 24x7 on March 31, 2005 (before the NRHM). The number of 24x7 PHCs today, as reported by the states is 7,212 signifying a big leap forward in getting patients to the government system.
Over 159,92 lakh women have been brought under the Janani Suraksha Yojana for institutional deliveries in the last three years. So far, 8,645 other paramedics have been appointed on contract. 9,073 doctors, 1,875 specialists, 20,977 staff nurses have been appointed on contract in the states so far, reducing the human resource gaps in many institutions. Indian Public Health (IPH) Standards have been finalised and a first grant of Rs. 20 lakh was made available to all the district hospitals of the country to improve their basic services, given the increased patient load due to JSY and other programmes. So far 243 Mobile Medical Units are operational in the states.
As per the Economic Survey, in the National AIDS Control Programme, major achievements during 2008-09 include scaling up targeted interventions for high risk groups to 1,271, counselling and HIV testing 101 lakh persons of which 41.5 lakh were pregnant women and providing ARV treatment to more than 2.17 lakh patients.
MV/GK /spandey/(Economic Survey 2009-1)
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Food grain production estimated at 229.85 million tonnes during 2008-09
RICE PRODUCTION GROWS BY 2.8 PER CENT: WHEAT TO BE MARGINALLY LOWER BY 1.2 PER CENT
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
- FOOD GRAIN PRODUCTION ESTIMATED AT 229.85 MILLION TONNES DURING 2008-09
- RICE PRODUCTION GROWS BY 2.8 PER CENT: WHEAT TO BE MARGINALLY LOWER BY 1.2 PER CENT
- FARM CREDIT FLOW INCREASES TO RS. 2,64,455 CRORE
- HIGHER MSP LEADS TO RECORD WHEAT PROCUREMENT
- FOOD SUBSIDY UP BY 40 PER CENT
- SUREVEY CALLS FOR RENEWED FOCUS ON IMPROVING PRODUCTIVITY
The Economic Survey for 2008-09 has put the production of foodgrains at 229.85 millions tones during 2008-09 in accordance with the third advance estimates for the year. This is an improvement of 1.97 million tones over the production estimated in the second advance estimate for 2008-09. However, the output at this level is marginally lower than the final estimates of 230.78 million tones for 2007-08.
The production of rice was 99.37 million tones in 2008-09 which is 2.8 per cent more than the production in the previous year. The survey says that increase in production of rice was mainly on account of Kharif season output growth of 3.4 per cent over the corresponding period of previous year. The production of Rabi rice is estimated to be lower by about 0.9 per cent in 2008-09. The wheat production, according to the Economic Survey, is expected to be marginally lower by 1.2 per cent at 77.63 million tones in 2008-09.
The Economic Survey also underscores a growth in area sown under all Rabi crops taken together as on 27th March 2009. Accordingly an area of 638.33 lakh hectares has been reported to be sown under Rabi crops in 2008-09 against 619.68 lakh hectares in the corresponding period of 2007-08. The area sown under Kharif crops during 2008-09 was however, lower by 2.3 per cent as compared to 2007-08.
The credit flow to the farm sector kept up the momentum as envisaged in the Farm Credit Package announced in June 2004. Accordingly, the farm credit flow during 2008-09 increased to 2,64,455 crore, up from Rs. 2,54,657 crore in 2007-08. The Survey emphasizes number of steps taken by the Government to enhance credit support to farmers. In this context the Survey mentions role of Kisan Credit Cards, revival of short terms rural co-operative credit structure through signing of MOU between the States and Government of India-NABARD, agriculture debt waiver and debt relief scheme 2008 etc. Under rehabilitation package for distress farmers for 31 suicide prone districts, in 4 States of Andhara Pradesh, Karnataka, Kerala and Maharashtra, Government of India has released Rs. 15,889.02 crore as on 31st March, 2009.
The Minimum Support Prices (MSP) for Kharif crops were raised substantially in 2008-09 and similarly MSPs of Rabi crops of 2008-09 ( to be marketed in 2009-10) were also raised. The higher MSP for Rabi Marketing Season (RMS) 2008-09 lead to a record procurement of 22.68 million tones of wheat. The procurement of rice in the financial year 2008-09 too was significantly higher at 32.8 million tones as compared to 26.3 million tones in 2007-08. The Survey points out that the procurement of foodgrains by FCI continues to be higher in the States of Punjab, Haryana, Uttar Pradesh and Andhra Pradesh. The overall procurement of coarse grains in Kharif Marketing Season till 31st March, 2009 has increased to 11.18 lakh tones from 2.04 lakh tones in 2007-08 due to highly remunerative MSPs. Elaborating performance under decentralize procurement scheme (DCP), the Survey observes that the States under DCP operations have shown a healthy increase in procurement of rice. The downward trend in procurement of wheat has been arrested in RMS 2008-09.
Food subsidy during 2008-09 has increased to Rs. 43,668 crore (provisional) during 2008-09 recording an increase of 40 per cent over the subsidy of Rs. 31,260 crore in 2007-08. The Survey observes that a total amount of subsidy as continued to rise at the national level. It points out that a provision of minimum nutritional support to the poor through subsidized foodgrains and ensuring price stability in different states are twin objectives of the food security system. " In fulfilling its obligation towards distributive justice, the Government incurs food subsidy" the Survey adds.
Referring to the challenges and future outlook the Economic Survey underlines a clear need for the renewed focus on improving productivity in specially in the light of limitations on increasing net sown area and the shrinking farm size. It also calls for maintaining current focus on developing rural infrastructure like rural roads for providing connectivity which is essential for movement of agricultural produce. Stating that the irrigation sector requires thrust in terms of investment and modern management, the Survey underscores a need for development of micro irrigation system and watersheds. It also emphasises the need for narrowing kept between the producer prices and consumer prices, development of marketing infrastructure and storages and warehouses, cold chains and modern technology driven spot markets. "Innovative institutional mechanism to provide credit and financial products for farm sector keeping their risk bearing ability in view is the need of the hour" Survey adds.
The Survey also states farmers needs to be facilitated for taking up value additions such as processing of agricultural produce, horticulture, pisciculture, poultry etc. In order to ensure benefits accruing to the targeted population, the Survey calls for a mission approach on promotion of Smart Cards with its cross reference to ration cards and voter ID cards. It also invites attention to the issues of sustainability of agriculture in the light of environmental concerns like soil erosion, water logging, reduction in ground water level and decline in surface irrigation. The Survey stresses that the consequences of climate change on Indian agriculture needs to be factored in the strategy for development of agricultural sector. "On the whole, while the challenging faced by the agricultural sector are numerous, the possibilities for new investment, the use of new technologies that could generate values of the society and incomes to the rural sector are immense", the Survey concludes.
DNM/RCJ/ska /spandey/(Economic Survey 2009-2)
Press Information Bureau
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Outlook for trade sector in 2009 not very encouraging says Economic Survey
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
The Economic Survey for 2008-09 says that the outlook for the trade sector in 2009 is not very encouraging with IMF projecting a negative growth in world output at -1.3 per cent and world trade volume projected to growth at -11 per cent. With import demand falling from major trading partners from India's export of goods and services is expected to be impacted. The steep fall in petroleum and commodities prices could have a positive impact in the import side and for the industrial sector. In 2010, recovery is expected with IMF projections at 1.9 per cent for world output and 0.6 per cent for World trade volume of goods and services.
The subdued global outlook calls for efforts at both national and international levels to revive growth. While efforts to promote exports are needed, the Economic Survey emphasises the need to guard against protectionist measures originating from our trade partners. The Survey says, we also need to desist from any protectionist tendencies and proceed on the reform path.
The Survey says, besides short-term relief measures and stimulus packages, some fundamental policy changes are needed. For the merchandise trade sector these include continuation of the reduction in customs and excise duty to make our exports and industry competitive, streamlining of existing export promotion schemes, giving special attention to export infrastructure alongwith rationalisation of port service charges, weeding out unnecessary customs duty exemptions and checking the proliferation of SEZs.
In the services sector a road map of specific policies needs to be drawn not only to overcome the impact of the current global crisis, but also to accelerate the growth of our economy and the total exports as this sector has been showing a steady and promising performance with relatively lesser support.
DNM/BS /spandey/(Economic Survey 2009-2)
Press Information Bureau
Government of India
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More than 2.7 lakh new schools opened so far as part of SSA
IMPRESSIVE STRIDES IN HIGHER EDUCATION
THIRD PHASE OF EXPANSION OF ICDS INITIATED
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
The Sarva Shiksha Abhiyan (SSA) is being implemented in partnership with State Governments to address the needs of children in age group of 6-14 years The Economic Survey for 2008-09 tabled in Parliament today states that the achievements of SSA till December 2008 are opening of 2,76,903 new schools, construction of 2,25,383 school buildings, construction of 9,18,981 additional classrooms, 1,82,019 drinking water facilities, construction of 2,51,023 toilets, supply of free textbooks to 8.40 crore children appointment of 9.66 lakh teachers and in-service training for 23.82 lakh teachers. There has been a significant reduction in the number of out-of-school children on account of SSA interventions.
Following are instances of some of the expansion of higher educational institutions as per the Survey:
An ordinance has been promulgated under Article 123 of the Constitution for establishment of 15 Central Universities including the conversion of three State Universities into Central Universities – one in each such state which does not have a Central University, except Goa, which has not been included at the request of the State Government.
Six new Indian Institutes of Technology (IITs), one each in Bihar, Andhra Pradesh, Rajasthan, Orissa, Gujarat and Punjab have been set up during 2008-09. Classes have also been started from the academic session 2008-09.
One new Indian Institute of Management (IIM) namely the Rajiv Gandhi Indian Institute of Management (RGIIM) at Shillong in Meghalaya has started functioning from the academic session 2008-09.
Two new Indian Institutes of Science Education & Research (IISERs) have been set up at Bhopal and Thiruvananthapuram, which have started functioning with the academic session 2008-09.
A new Scholarship Scheme has been started to cover top 2 per cent of the student population of Class XII (equally divided between boys and girls on the basis of Class XII results) by providing them with scholarship of Rs. 1,000 per month for 10 months in a year for the first three years of undergraduate level studies and Rs. 2,000 per month for 10 months in a year for subsequent 2 years.
The Economic Survey also shows that the proposal for the third phase of expansion of the ICDS scheme for 792 additional projects, 2.13 lakh additional Anganwadi Centres (AWCs) and 77,102 mini-AWCs and a proposal for 20,000 AWCs on demand has also been approved in October 2008 and administrative sanctions have been issued to all states/Uts. This would take the total number of Anganwadi Centres to 14 lakh across the country with special focus on coverage of SC/ST and minority population. The financial norms for supplementary nutrition have been revised from Rs. 2.06 to Rs. 4.21 per beneficiary.
MV/GK /spandey/(Economic Survey 2009-2)
Press Information Bureau
Government of India
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Social sector initiatives show substantive progress during last year
New Delhi : July 2, 2009
The Economic Survey for 2008-09 tabled in Parliament today states that in consonance with the Government's commitment to inclusive growth and faster social sector development to remove disparities, substantial progress has been made by the Central Government on some of the major social sector initiatives during the year.
Bharat Nirman has received an outlay of Rs. 40,900 crore in the interim budget for 2009-10 as against Rs. 31,280 crore (including NER component) in 2008-09. Up to March 2009, a total length of 2,14,281,45 kilometres of road works has been completed under the Pradhan Mantri Gram Sadak Yojana (PMGSY) with a cumulative expenditure of Rs. 46,807.21 crore.
National Rural Employment Guarantee Scheme
The scheme has now been extended to all the districts of the country. More than 4.47 crore households were provided employment in 2008-09. This is a significant jump over the 3.39 crore households covered under the scheme during 2007-08. Out of the 215.63 crore person-days created under the scheme during this period, 29 percent and 25 percent were in favour of SC and ST population.
Rural Sanitation
There has also been tremendous increase in the access to sanitation facilities by rural households. The sanitation coverage among rural households has increased from 21.9 percent in 2001 to 27.3 percent in 2004 and has more than doubled since then to 63.91 per cent (of 2001 Census households) as on May 20, 2009. The total Sanitation Campaign (TSC) is one of the eight flagship programmes of the Government. TSC projects have been sanctioned in 593 rural districts of the country at a total outlay of Rs. 17,885 crore with a Central share of Rs. 11,094 crore. Since 1999, over 5,56 crore toilets have been provided for rural households under TSC. A significant achievement has also been the construction of of 8.71 lakh school toilets and 2.72 lakh Anganwadi toilets. With increasing budgetary allocations and focus on rural areas, the number of households being provided with toilets annually has increased from only 24,41 lakh in 2002-03 to 98.7 lakh in 2006-07.
Pradhan Mantri Gram Sadak Yojana
PMGSY is funded mainly from the accruals of diesel cess in the Central Road. Upto March 2009, a total length of about 2,14,281,45 kilometres of roadwork has been completed with cumulative expenditure of Rs. 46,807.21 crore.
Swarnajayanti Gram Swarozgar Yojana
It is the only self-employment programme currently being implemented for the rural poor. Up to March 2009, 34 lakh self help groups (SHGs) had been formed and 120.89 lakh swarozgaris have been assisted with a total outlay of Rs. 27,183.03 crore.
Swarna Jayanti Shahari Rozgar Yojana
The fund allocation for the scheme was Rs. 515 crore during 2008-09 and Rs. 540.67 crore has been released up to March 31, 2009. With regard to the number of beneficiaries during 2008-09 9,47,390 urban poor were assisted to set up individual/group micro enterprises and 14,84,209 urban poor were imparted skill training under SJSRY as per the progress reports received up to the end of March 31, 2009.
MV/GK /spandey/(Economic Survey 2009-2)
Press Information Bureau
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Central Government expenditure on social services increases to 19.44% in 2008-09 compared to 11.23% in 2002-03
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
The Economic Survey for 2008-09 shows that the Government has been increasing its outlays in the social sector substantively. The Economic Survey 2008-09, tabled in Parliament today states that the share of the Central Government's expenditure on social services including rural development in total expenditure (plan and non-plan) has increased from 11.23% in 2002-03 to 19.44% in 2008-09. Expenditure on education as a proportion of total expenditure has increased from 9.5% in 2003-04 to 10.8% in 2008-09. However the reach of public and quasi public goods and services supplied by the State to people still shows leakages in the schemes and the benefits in full do not reach the targeted groups.
The Survey states that the Government has approved the constitution of UID Authority of India (UIDAI). The initial UID database would be created using the electoral rolls database of the Election Commission of India. While some innovative measures have been initiated in NREGS to bring in more transparency and plug leakages, UID number would help greatly in proper targeting and ensuring services reaching the intended beneficiaries of the Government programmes and hence serve as the basis of efficient delivery of services.
Based on a Unique ID number (UID) and associated information all residents should be entitled to a smart card containing specified unchangeable data. Entitlements would then need to be based upon the data contained in the smart card and services/subsidies/entitlements received would also be recorded against this card.
MV/GK /spandey/(Economic Survey 2009-2)
Press Information Bureau
Government of India
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Industrial output grows by 2.4 per cent in 2008-09
POSITIVE SIGNS OF INDIAN INDUSTRY MOVING TOWARDS RECOVERY
New Delhi : July 2, 2009
ECONOMIC SURVEY 2008-09
Though the growth of the industrial sector started to slowdown in the first half of 2007-08, the overall growth during the year remained as high as 8.5 per cent. The industrial sector witnessed a sharp slowdown during 2008-09 as a consequences of successive shocks, the most important being the knock-on effects of the global financial crisis. The pace of slowdown accelerated in the second half of 2008-09 with the sudden worsening of the international financial situation and the global economic outlook. The year 2008-09 thus closed with the industrial growth at only 2.4 per cent as per the Index of Industrial Production.
The slowdown in manufacturing over successive quarters started from Q1 of 2007-08. This was more or less replicated by the mining sector and closely followed by electricity. However, in the third quarter of 2008-09, the manufacturing sector witnessed a sharp drop in growth which turned negative in the fourth quarter. Growth of the mining sector declined over successive quarters of 2008-09 to reach a zero rate in the fourth quarter.
The increase in the price of imported crude was passed on into the domestic market in June 2008, but, in a very limited way through a hike in the price of motor spirit, HSD and LPG. However, the persistent rise in the price of crude had started to impact petro-based industrial inputs adding to fuel costs. That apart, the rise in the price of other commodities, particularly metals and ores from the latter half of 2006-07 to the second half of 2008-09 also had its effect on the cost side of the manufacturing sector.
Growth in production of capital goods continued at a robust pace reflecting perhaps the high investment rates. However, with the decline in the growth of intermediate goods (with a weight of 26.5 per cent) from Q 1 of 2008-09, the growth in overall Iip showed a sharp dip that got accentuated in Q3 of 2008-09 when the remaining groups also showed a sharp drop in growth.
The broad growth correspondence between the two-digit level industrial groups and the use-based industry groups can be established by juxtaposing the former against the latter. The growth in consumer non-durables has been boosted by the high growth in beverages and tobacco products, while the other major components-food products, chemicals and leather products showed sluggish/negative growth. The growth in basic goods is closely aligned to that in electricity and mining that constitute substantial part of the weight of basic goods; the most of the rest are chemical products, rubber, plastic and petroleum products and steel. Intermediate goods are a more dispersed group dominated by chemical, textile, rubber, metal product intermediates, most of which experienced negative growth in 2008-09. While the high growth of machinery and equipments bolstered the growth of capital goods, the poor to average performance of transport equipments dampened the overall growth of capital goods.
The growth in any industrial group is determined by the level of production during the current period and the base level. A simple classification of IIP groups in terms of their growth rates reveals that only two out of 17 industrial groups-beverages and tobacco and machinery-grew at robust rates during 2008-09 despite a high base. Seven of the 17 groups showed low growth ranging between 5 per cent to Nil. Of these, three groups (miscellaneous manufacturing, basic metals and alloys and chemicals and chemical products) had a high base in the previous year. Of the eight industrial gro8ups that witnessed a decline in production during 2008-09, the high base factor was significant only for three items- leather products, wood products and jute textiles. In general, it can therefore be said that 2008-09 was characterized by a decline in growth largely on account of a slowdown rather than due to a high base in the previous year 2007-08.
India ranks as the fifth largest producer of steel in the world. The crude steel production grew at an annual rate of 9.2 per cent during 2003-04 to 2007-08. The increase in production came on the back of capacity expansion, mainly in the private sector plants, and higher utilization rates.
Metal products industry suffered from the second consecutive year of decline; its index of production declined by 5.6 per cent in 2007-08 and further by 4 per cent in 2008-09.
The machinery sector (except the transport equipment) grew at 8.7 per cent during 2008-09, on the top of five consecutive years of growth in excess of 10 per cent. In terms of contribution to the growth of the sector, the bulk was accounted for by insulated cables and wires, the production of which more than doubles, as per IIP during 2008-09. The other important items that recorded significant growth during the year included TV receivers, diesel engines, industrial machinery, turbines, hydraulic machines and cylinders, boilers, power-drivern pumps, electric generators, cooling towers, cutting tools and dumpers.
The year 2007-08 was marked by substantial growth in the revenue of IT-ITeS industry, BPO, software and services exports and software and services employment. However, the expected growth in 2008-09 is significantly lower when compared to 2007-08.
Production of the automotive industry grew at a CAGR of 11.5 per cent over last five years. The industry has a strong multiplier effect on the economy due to its deep forward and backward linkages with several key segments of the economy.
There are positive signs that the Indian industry may have weathered the most severe part of the shock and is now moving towards a recovery. Some of the positive signs are the recent upturn in the generation of electricity, the improvement of cement dispatches and rise in the offtake of bank credit.
India has a large domestic market with immense absorptive capacity for industrial goods as also inputs for the development of the infrastructure implies that the demand side provides scope for expansion. At this juncture, when the prospect for industrial output and prices in most industrial economies seem to be grim, the configuration of prices, output and market size makes the Indian industry one of the few attractive destinations for investment, the Survey adds.
DNM/RCJ/ska /spandey/(Economic Survey 2009-2)
PIB Kolkata
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