Economic Survey 2004-05
- Economy poised to achieve 6.9 per cent growth
- Inflation down to 5 per cent
- Growth upswing despite hardening in global oil/steel prices/Tsunami
- Agriculture and allied sector looking up despite deficient rainfall
- Shortfall in Khariff to be offset by good Rabi crop
- Buffer stock position comfortable/decline in food grains may not affect
- Non-foodgrain agriculture to grow by over 1 per cent
- Share of agriculture in GDP down by 3.5 per cent since 2001-02
- Industrial production to be up by 8.4 per cent
- Electricity generation to rise by 6.5 per cent
- Exports to increase by 23.1 per cent/Imports by 32.1 per cent
- Services sector records 8.9 per cent growth
- Foreign Exchange Reserves to cross 130 billion dollars
- Exports to double to 150 billion dollars in 2008-09
- 30 per cent increase in agriculture credit, flow to double in 3 years
- Significant decline in non performing assets of Banks
- Marginal increase in deposit rates/interest on housing loans firm up
- Revenue deficit sought to be lowered to 2.5 per cent of GDP
- Budget estimates in Central finances to improve in the last quarter
- Consolidated fiscal deficit of Centre/States to fall by 7.9 % of GDP
- IPO grew 5 times to Rs.35859 crore in 2004
- Significant improvement in savings and investment observed
- Improvement seen in and employment ratio
- Major programmes to achieve NCMP targets
- Priority to agriculture, manufacturing and finance
- Policy on Public-private participation in infrastructure soon
- FDI to play pivotal role in the economy
- Tapping Buoyancy in investments/exports to further economic growth
Summary of Economic Survey 2004-05
Ahead of the initial expectations for 2004-05, the economy is hovering to help the Government achieve the targets envisaged in the National Common Minimum Programme (NCMP). The Survey highlights the 6.9 per cent growth with inflation down to 5 per cent, agriculture and allied sector looking up despite deficient rainfall, prospects of good rabi crop, significant rise in industrial production, electricity generation, exports, services sector, foreign exchange reserves, lower revenue deficit, phenomenal growth in IPOs, improvement in poverty and employment ratio etc. Portraying a bright period for the Indian economy, the Survey states that the initiatives taken under the NCMP, enhanced FDI flow, buoyancy in investments and exports, policy for public private participation in infrastructure and priority to agriculture, manufacture and resource mobilization etc. will go a long way in furthering the economic growth.
The Survey points out that while the economy grew by 8.5 per cent in 2003-04, the highest ever in two decades, the initial projections of growth for 2004-05 were put anywhere between 6. 2.to 7.4 per cent. This lower growth is attributed to the deficient rainfall. The Central Statistical Organization has in its advanced estimate placed the growth at 6.9 per cent for the year. The economy has managed to maintain the growth momentum in spite of a deficient monsoon, hardening of world oil and steel prices and extensive damage caused by Tsunami in several southern States.
The current year began with buoyancy in industrial growth, early onset of monsoon and forecast of a normal rainfall. But the summer crop i.e. the Kharif suffered due to deficient rainfall, which is expected to be partially offset by the prospects of a good Rabi crop. The overall food grain production during the year is estimated to decline by about 3 per cent but the buffer stock position will minimize the effect of shortfall.
The year that also began with an annual inflation rate of 4.5 per cent, which rose to a peak of 8.7 per cent in August, was brought down to 5 per cent with the Government taking several fiscal measures. This is much lower compared to 6.1 per cent a year ago. Manufactured products and primary articles recorded lower inflation rates while it was higher in case of fuel, power etc. The policy measures taken by the Government brought down the inflation level to 3.8 per cent in December 2004 as per the consumer price index for Industrial Workers.
The period also saw strengthening of the rupee against the US$ and the trend getting reversed again from October 2004 against the major non-dollar currencies. India's foreign exchange reserves continued to rise and is expected to cross shortly the level of 130 billion dollars. The accretion to reserves so far this year is about 16 billion dollars compared to 31 billion in the corresponding period of last year.
The external debt position continued to improve and its share as proportion of GDP went down from 20.2 to 17.8 per cent between March 2003 and March 2004.
Despite lower growth of money supply in the current year, there was an impressive growth in gross credit by scheduled commercial Banks and the Government also announced a comprehensive policy to enhance agricultural credit by 30 per cent in 3 years. There was also a significant decline in the non-performing assets of scheduled Commercial Banks. Deposit rates of 65 major Banks went up by 25 basis points and decline in prime lending rates of five major Banks.
Regarding fiscal consolidation, the deficit of the central Government as a proportion of GDP at 4.6 percent was lower than the Budget estimate of 5.6 per cent. A further improvement in this ratio to 4.4 per cent is budgeted for 2004-05. The increasing share of revenue deficit in fiscal deficit distinctly reveals the deterioration in the composition of fiscal deficit and in the quality of expenditure, the survey points out. Improved performance of Central finances is expected in the last quarter of the year with the initiatives taken by the Government. Efforts at improving the fiscal health of States are also continuing. The consolidated fiscal deficit of the Centre and States is budgeted to come down from 9.4 per cent of GDP in 2003-04 to 7.9 per cent in 2004-05. The decision of the States to introduce VAT from April this year marks the culmination of efforts taken at reforming domestic trade taxes. The equity markets continued to remain upbeat in the current year reflecting growth in the profit of Corporations. The Initial Public Offerings (IPOs) grew five times to Rs.35,859 crore in 2004. The significant improvement in the rates of savings and investment continued and a higher rate in 2003-04 was noticed in household, private and public sectors.
According to the second advance estimates of CSO, the food grains output is expected to decline to 206.4 million tones in 2004-05 from 212 million tones in the previous year. However, a bumper harvest of cotton during the year augurs well for the cotton textile industry. The industrial sector registered an impressive growth of 8.4 per cent in the first three quarters of the year. The improvement is particularly pronounced in manufacturing, capital goods and consumer durables. 6 core industries i.e. electricity, coal, finished steel, cement, crude oil and petroleum products registered a lower average growth of 5.4 per cent. The infrastructure sectors like rail goods traffic, cargo handled at ports and airports and air passenger traffic, however, recorded higher growth rates.
Though no official estimates of poverty and unemployment available after 2000, subsequent mini surveys suggest that the level of poverty has come down and employment increased.
The National Common Minimum Programme of the Government attached high priority to the progress of social sector to enable the people to participate and benefit from the development process. The major programmes initiated under it during the year include, launching of the National Food for Work programme in 150 most backward districts, introduction of National Rural Employment Guarantee Scheme, additional budgetary support for planned programmes like food for work, Sarva Shiksha Abhiyan, mid-day meal, basic health care, accelerated irrigation benefit programme, drinking water and roads, imposition of a cess of 2 per cent on Central taxes for universal education and a new universal health insurance scheme for the poor.
The Survey states that vigorous efforts are needed to accelerate growth and to achieve the targets of NCMP. Five issues that need to be addressed are:
- stepping up investment in agriculture and allied activities,
- simplifying procedures and relaxing entry-exit barriers to give a boost to trade,
- enhancement of investment in infrastructure,
- resource mobilization
- enabling public private participation in infrastructure sector.
Initiatives taken in a number of sectors like telecom, roads, ports and civil aviation have begun to yield results and made a good impact on economic growth. The Survey stressing the role of higher foreign investment both FDI and FII for accelerated economic growth, said trade liberalization, introduction of greater competition and open foreign investment policies have been successful in transforming several sectors of the Indian manufacturing industry into globally competitive entities. However, a strong case exists for revisiting the issue of caps in sectors like coal, mining, insurance, real estate and retail trade. The recent buoyancy in investment and exports needs to be enhanced to leverage growth of the Indian economy; but success lies on how vigorously reforms are pursued.