FOR
third successive year, the Indian economy has registered a highly
impressive growth during
fiscal 2005-06. Sustained manufacturing activity and impressive
performance of the services sector with reasonable support from
the recovery in agricultural activity have added greater momentum
to this growth process. After recording some slowdown in the third
quarter (October-December) of 2005-06, real gross domestic product
(GDP) registered a sharp increase in the fourth quarter (January-March)
of 2005-06 benefiting from a pick-up in almost all segments of agriculture,
industry and services. According to the revised estimates released
by the Central Statistical Organization (CSO) in May 2006, real
GDP accelerated from 7.5 per cent in 2004-05 to 8.4 per cent during
2005-06. The Indian economy has, thus, recorded an average growth
of over 8 per cent in the latest three years (2003-04 to 2005-06).
Growth Rates of Real GDP
(Base Year
: 1999-2000)
(Per
cent)
| Sector
|
2000-01 to
2002-03 (Average
|
2003-04
|
2004-05
|
2005-06
|
2004-05 |
2005-06 |
| Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
| Agriculture |
-0.2 |
10.0 |
0.7 |
3.9 |
3.5 |
-0.2 |
-1.2 |
1.5 |
3.4 |
4.0 |
2.9 |
5.5 |
| Allied Activities |
(23.5) |
(22.2) |
(20.8) |
(19.9) |
- |
- |
-
| -
| -
| -
| -
| - |
| 1.1
Agriculture |
-0.5 |
10.7 |
0.7 |
-
| -
| -
| -
| -
| -
| -
| -
| - |
| Industry |
5.2 |
6.6 |
7.4 |
7.6 |
6.6 |
8.0 |
8.1 |
6.8 |
9.5 |
6.3 |
7.0 |
7.9 |
| |
(19.7) |
(19.5) |
(19.5) |
(19.3) |
- |
- |
- |
- |
- |
- |
- |
- |
| 2.1
Mining and Quarrying |
4.4 |
5.3 |
5.8 |
0.9 |
8.2 |
6.0 |
5.7 |
3.7 |
3.1 |
-2.6 |
0.0 |
3.0 |
| 2.2
Manufacturing |
5.7 |
7.1 |
8.1 |
9.0 |
6.6 |
8.3 |
9.2 |
8.1 |
10.7 |
8.1 |
8.3 |
8.9 |
| 2.3
Electricity, Gas and Water Supply |
2.8 |
4.8 |
4.3 |
5.3 |
4.9 |
7.9 |
3.1 |
1.4 |
7.4 |
2.6 |
5.0 |
6.1 |
| Services |
6.6 |
8.5 |
10.2 |
10.3 |
10.0 |
8.2 |
10.6 |
11.6 |
10.1 |
10.3 |
9.7 |
11.0 |
| |
(56.8) |
(58.3) |
(59.7) |
(60.7) |
- |
- |
- |
- |
- |
- |
- |
- |
| 3.1
Trade, Hotels, Restaurants, Transport, Storage and Communication |
8.5 |
12.0 |
9.7 |
11.0 |
10.2 |
12.9 |
10.6 |
11.5 |
10.6 |
11.2 |
11.7 |
11.0 |
| 3.2
Financing, Insurance, Real Estate and Business Services |
6.5 |
4.5 |
9.2 |
9.7 |
8.8 |
7.5 |
9.7 |
10.7 |
8.8 |
10.5 |
8.9 |
10.5 |
| 3.3
Community, Social and Personal Services |
4.1 |
5.4 |
9.2 |
7.8 |
10.7 |
4.8 |
8.5 |
12.7 |
7.3 |
8.0 |
8.4 |
7.6 |
| 3.4
Construction |
5.9 |
10.9 |
12.5 |
12.1 |
8.9 |
6.8 |
20.8 |
13.5 |
12.4 |
12.3 |
11.5 |
12.0 |
| Real
GDP at Factor Cost |
4.6 |
8.5 |
7.5 |
8.4 |
7.9 |
6.7 |
7.0 |
8.6 |
8.5 |
8.4 |
7.5 |
9.3 |
Agriculture
The kharif crops coverage up to July 10, 2006 increased by
around 11.9 per cent over a year ago. For all crops taken together,
around 27 per cent of the normal area has been sown so far. Total
foodgrains production during 2005-06 was placed at around 208 million
tonne, an increase of 5 per cent over the previous year, mainly
on the back of higher output of rice. The increase in the production
of non-foodgrains crops was led mainly by sugarcane and cotton.
Progress
of Area under Khariff Crops - 2006-07
(Million Hectares)
| Crop
|
Normal
|
Area Coverage (As on July 10) |
| 2005 |
2006 |
Variation 2006 over 2005 |
| Rice |
39.9 |
5.4 |
6.1 |
0.7 |
| Coarse
Cereals |
22.9 |
6.8 |
7.3 |
0.5 |
| Of
which |
|
|
|
|
| Bajra |
9.3 |
2.4 |
2.1 |
-0.3 |
| Jowar |
4.6 |
1.1 |
1.2 |
0.1 |
| Maize |
6.0 |
2.7 |
3.5 |
0.8 |
| Total
Pulses |
10.6 |
2.0 |
2.7 |
0.7 |
| Total
Kharif Oilseeds |
15.1 |
3.3 |
3.4 |
0.1 |
| Of
which |
|
|
|
|
| Groundnut |
5.5 |
1.2 |
1.6 |
0.4 |
| Soyabean |
6.3 |
1.3 |
1.1 |
-0.2 |
| Sesamum |
1.6 |
0.3 |
0.3 |
0.0 |
| Sunflower |
0.5 |
0.2 |
0.4 |
0.2 |
| Sugarcane |
4.3 |
4.3 |
4.5 |
0.2 |
| Cotton |
8.3 |
2.5 |
3.3 |
0.8 |
| All
Crops |
101.1 |
24.3 |
27.2 |
2.9 |
Source:
Ministry of Agriculture, Government of India
Agricultural Production
(Million
Tonne)
| Crop |
2003-04 |
2004-05 |
|
| Target |
Achievement |
Target |
Achievement |
Target |
Achievement |
| Rice |
87.0 |
88.5 |
93.5 |
83.1 |
87.8 |
91.0 |
| Wheat |
72.1 |
72.2 |
79.5 |
68.6 |
75.5 |
69.5 |
| Coarse
Cereals |
37.8 |
37.6 |
36.8 |
33.5 |
36.5 |
34.7 |
| Pulses |
15.2 |
14.9 |
15.3 |
13.1 |
15.2 |
13.1 |
| Total
Foodgrains |
212.1 |
213.2 |
225.1 |
198.4 |
215.0 |
208.3 |
| Kharif |
112.0 |
117.0 |
113.8 |
103.3 |
109.9 |
109.7 |
| Rabi |
100.0 |
96.2 |
111.3 |
95.1 |
105.1 |
98.6 |
| Total
Oilseeds |
25.1 |
25.2 |
26.2 |
24.4 |
26.6 |
27.7 |
| Kharif |
17.0 |
16.7 |
16.3 |
14.2 |
16.2 |
16.8 |
| Rabi |
8.1 |
8.5 |
9.9 |
10.2 |
10.4 |
10.9 |
| Sugarcane |
236.2 |
233.9 |
270.0 |
237.1 |
237.5 |
278.4 |
| Cotton
# |
13.8 |
13.7 |
15.0 |
16.4 |
16.5 |
19.6 |
| Jute
and Mesta ## |
11.2 |
11.2 |
11.8 |
10.3 |
11.3 |
10.7 |
$ : Fourth Advance Estimates (July 15,2006)
# : Million bales of 170 kgs each; ## : Million bales of 180
kgs each
Source:
Ministry of Agriculture, Government of India
Industry
Industrial production continued to grow at 9.8 per cent during Q1
in 2006-07 The manufacturing sector with double digit growth (10.9
per cent) continued to be the key driver of industrial activity,
contributing almost 92.5 per cent of the growth in industry. Electricity
and mining sectors, however, continued to exhibit subdued growth.
The
robust performance of the manufacturing sector was largely led by
‘chemical and chemical products’, ‘machinery and equipments’, ‘basic
metal and alloy industries’, ‘transport equipment and parts’, and
‘non-metallic mineral products’. The manufacturing sector growth
at 10.9 per cent during Q1 of 2006-07 was the highest for this period
in the last ten years.
According
to the use-based classification, the capital goods sector registered
an impressive growth of 21.1 per cent during Q! of fiscal 2006-07
even on a high base, reflecting strong investment demand. This is
the highest growth for April-May period under the new base (1993-94=100).
Higher production of laboratory and scientific instruments, broad
gauge passenger carriage, boilers, complete tractors, industrial
machinery and textile machinery boosted capital goods production.
Basic goods sector was buoyed up by growth in cement sector, carbon
steel and other minerals. Intermediate goods sector, after recording
subdued growth during most of 2005-06, witnessed moderate improvement,
facilitated by higher production of viscose staple fibre, filament
yarn, cotton yarn, paints, enamels and varnishes, and PVC pipes
and tubes. Consumer goods, both durable and non-durable segments,
on the other hand, recorded some deceleration, partly on account
of base effect.
Infrastructure
The
infrastructure sector recorded growth of 5.9 per cent in Q1 of 2006-07
against 7.1 per cent in comparable period in fiscal 2005-06
on account of deceleration in all industries except petroleum refinery
products Double-digit growth in the petroleum refinery products
and moderation in growth of the cement and steel sectors could be
attributed largely to base effect. The decline in crude oil production
resulted from fall in production in plants of ONGC at Mumbai High.
Growth Rate of Manufacturing Groups
(Per Cent)
| |
Index of
Industry Group Weight in the Industrial Production
|
Growth Rate |
Weighted Contribution |
| April-May |
April-May |
| 2005 |
2006 (P) |
2005 |
2006 |
| Chemicals and chemical products except products of petroleum
& coal |
14.0 |
13.3 |
12.5 |
25.7 |
23.4 |
Machinery and equipment other than transport equipment
|
9.6 |
11.3 |
13.4 |
16.6 |
18.7 |
| Basic
metal and alloy industries |
7.5 |
16.2 |
21.0 |
13.1 |
16.9 |
| Transport equipment and parts |
4.0 |
13.6 |
21.4 |
8.4 |
12.8 |
| Other
manufacturing industries |
2.6 |
9.4 |
31.6 |
3.0 |
9.3 |
| Non-metallic mineral products |
4.4 |
7.7 |
12.2 |
5.1 |
7.4 |
| Beverages, tobacco and related products |
2.4 |
10.4 |
11.4 |
5.4 |
5.6 |
| Rubber, plastic, petroleum and coal products |
5.7 |
2.5 |
8.0 |
1.7 |
4.8 |
| Paper
and paper products and printing, publishing and allied activities |
2.7 |
12.5 |
12.1 |
3.9 |
3.7 |
| Wool,
silk and man-made fibre textiles |
2.3 |
-8.4 |
11.9 |
-3.0 |
3.3 |
| Textile products (including wearing apparel) |
2.5 |
25.3 |
9.6 |
7.8 |
3.2 |
Cotton
textiles
|
5.5
|
9.2 |
2.9 |
3.9 |
1.2 |
| Jute
and other vegetable fibre textiles (except cotton) |
0.6 |
-3.6 |
-2.8 |
-0.1 |
-0.1 |
Metal
products and parts (except machinery and equipment)
|
2.8 |
6.7 |
-4.1 |
1.7 |
-0.9 |
| Leather and leather & fur products |
1.1 |
11.4 |
-12.1 |
1.2 |
-1.2 |
| Wood
and wood products, furniture & fixtures |
2.7 |
-1.3 |
-21.3 |
-0.2 |
-2.4 |
Food
products
|
9.1 |
7.4 |
-7.6 |
5.8 |
-5.5 |
| Manufacturing – Total |
79.4 |
10.3 |
10.9 |
100.0 |
100.0 |
Source
: Central Statistical Organization.
Services
Services sector with double-digit growth during the past two fiscal
(2004-05 & 2005-06) has further strengthened its place as the
leading sector of the Indian economy. Services sector now accounts
for more than 60 per cent of overall GDP. Lead indicators of
services sector performance for April-May 2006 suggest continued
buoyancy. Revenue earning freight of the railways continued to record
strong growth. Substantial activity was witnessed in cargo handled
by civil aviation and passengers handled at domestic and international
airports. There was a sharp rise in new cell phone connections.
Healthy growth in bank deposits and non-food credit, and, increased
business process outsourcing-information technology enabled services
exports are expected to buoy up the sub-sector ‘financing, insurance,
real estate and business services’.
Indicators of Service Sector Activity
(Growth rates in per
cent)
| Sub-sector |
2004-05 |
2005-06 |
April |
| |
|
|
2005 |
2006 |
Tourist arrivals
|
23.7 |
11.7 |
19.7 $ |
20.0 $ |
Commercial vehicles production
|
28.6 |
10.6 |
-5.3 |
49.7 |
| Railway revenue earning freight traffic |
8.1 |
10.7 |
14.9 |
11.0 |
| New
cell phone connections |
10.4 |
89.4 |
7.6 |
167.0 |
| Cargo
handled at major ports |
11.3
|
10.3 |
15.8
|
-2.0 |
| Civil
aviation |
|
|
|
|
| a)
Export cargo handled |
12.4 |
7.3 |
12.0 |
10.1 |
b)
Import cargo handled
|
24.2 |
15.8 |
14.6 |
19.9 |
| c)
Passengers handled at international terminals |
14.0 |
12.8 |
9.9
|
16.2 |
| d)
Passengers handled at domestic terminals |
23.6 |
27.1 |
19.2 |
54.0 |
| Roads:
Upgradation of Highways |
16.1 |
-23.4 |
– |
– |
Cement
|
8.2 |
10.7 |
12.6 $ |
8.9 $ |
Steel
|
7.6 |
6.0 |
13.9 $ |
7.5 $ |
| Aggregate deposits |
11.9 |
22.3 |
14.9 @ |
20.7 @ |
Non-food credit
|
31.6 |
38.4 |
31.0 @ |
32.9 @ |
Central Government expenditure
|
5.6 |
2.2 |
-1.0 $ |
53.9 $ |
$
: April-May.
@ : Year-on-year as on July 7.
Business
Expectations Surveys
Various
business confidence surveys suggest that economic activity is
likely to remain buoyant in the near term. The National Council
of Applied Economic Research (NCAER) business confidence index
(BCI) increased by 1.7 per cent during April-September 2006 to
154 - the highest level since November 1994. According to the
NCAER survey, overall economic conditions and investment climate
increased by 2.5 percentage points and 2.2 percentage points,
respectively. The CII’s business confidence index for April-September
2006 increased by 2.1 per cent. The BCI was significantly higher
for non-manufacturing firms compared to the manufacturing firms.
The survey revealed that 88 per cent of the respondents planned
to increase investments while 75 per cent of the respondents expected
capacity utilization will be up to 100 per cent. The FICCI’s quarterly
Business Confidence Survey conducted during January-March 2006
indicated that the industrial sector was optimistic about sales,
selling price, profits, investments, employment and exports.
Although
the BCI registered a marginal fall from the preceding round partly
reflecting the base effect - the BCI had reached an all time high
in the previous round - almost 80 per cent of the respondents
expected overall economic conditions to be ‘moderately to substantially
better’ in the first half of fiscal 2006-7. The corporates appear
to be comfortably placed in terms of availability and cost of
credit. For 89 per cent of the companies, availability of credit
was not a constraining factor, while 78 per cent found cost of
credit within their affordable limits. The services sector continued
to be the most upbeat among the three industry sectors covered
in the survey. At the same time, the survey showed that companies
are finding rising cost of raw materials as the key challenge
to maintain and improve their growth performance.
According
to the Reserve Bank’s latest Industrial Outlook Survey, the Business
Expectations Index for Q2 of 2006-07 increased by 5.0 per cent
over the previous quarter’s level. The assessment about the overall
business situation for April-June 2006 showed an improvement in
the level of confidence over the previous quarter. Responses to
the survey suggest an improvement in expectations for the overall
business situation, production, capacity utilization, order books,
employment, exports, imports, selling prices and profit margins
during the Q2 quarter July-September 2006-07 vis-à-vis
Q1. The financial situation is expected to show an improvement
during JQ2 of financial year 2006-07. While working capital finance
requirement is expected to increase, the availability of finance
is also expected to improve .
Business Expectations Surveys
| Agency |
Business Expectations |
Growth over
a year ago |
Growth over
previous round |
| |
|
Index |
(per cent) |
(per cent) |
Dun
& Bradstreet
|
2006
(April-June)
|
Business Optimism Index
|
7.5 |
5.8 |
| NCAER |
2006
(April-September) |
Business Confidence Index |
7.6 |
1.7 |
FICCI
|
2006
(April-September) |
Business Confidence Index
|
5.4
|
-1.4 |
| CII |
2006
(April-September) |
Business Confidence Index |
.. |
2.1 |
RBI
|
2006
(July-September) |
Business Expectation Index |
5.8
|
5.0 |
Net Response on ‘A Quarter Ahead’ Expectations
About the Industrial Performance
(Per
cent)
| |
Parameter |
Response |
July-Sept 2005 (816) |
Oct-Dec 2005
(961) |
Jan-March 2006
(934) |
Apr-June 2006
(1086) |
June-Sept 2006
(1073) |
Overall business situation
|
Better |
45.5 |
51.3 |
49.8 |
46.3 |
53.1 |
Financial situation
|
Better |
36.7 |
42.3 |
40.7 |
40.4 |
43.4 |
| Working capital finance requirement |
Increase |
28.8 |
32.7 |
31.9 |
30.6 |
32.7 |
| Availability of finance |
Improve
|
30.7 |
34.1 |
34.1 |
33.8 |
35.0 |
| Production |
Increase
|
40.7 |
46.9 |
46.3 |
42.5 |
49.4 |
| Order
books |
Increase |
|