Survey projects 8.1 percent GDP growth

       New Delhi: After growing at 8.5 per cent and 7.5 per cent in the two previous years, Indian economy is projected to grow at 8.1 per cent in fiscal 2005-06. According to the pre-budget Economic Survey for fiscal 2005-06 presented by Finance Minister P Chidambaram in Parliament on Monday the GDP growth is projected to remain at 8.1 per cent for the current fiscal with new industrial resurgence, pick up in investment and modest inflation.

     Some significant dimensions of the dynamic growth in recent years are: a new industrial resurgence; a pick up in investment; modest inflation in spite of spiraling global crude prices; rapid growth in exports and imports with a widening of the current account deficit; laying of some institutional foundations for faster development of physical infrastructure; progress in fiscal consolidation; and the launching of the National Rural Employment Guarantee (NREG) Scheme for inclusive growth and social security, it said. However, it cautious that the rosy picture of economy was not devoid of risks of inflation, hardening interest rate and fiscal deficit and prescribed hastening tax and labour reforms and measures to remove infrastructure bottlenecks to sustain high growth. It also favoured levying user charges and cutting unwanted subsidies. The Survey said that the Indian industry needed to be unburdened from high level of taxes and distortive exemptions that provided perverse incentives. Simplification and digitisation of tax administration remains a pre-requisite for a transparent and hassle free tax system, the report card of the government, it said.

     The Survey pointed out that in the aftermath of the implementation of the Fifth Pay Commission's recommendations, the general government's fiscal deficit had increased in each of the five years to reach a peak of 9.9 per cent in 2001-02. With the announcement of the impending constitution of the Sixth Pay Commission, there is need to exercise caution to avoid a repetition of a similar deterioration in the medium term, it said. While significant progress has been made in the rationalisation of duties, reduction in the rates of taxes and other reforms, including procedural, the reform of the tax system still remains an unfinished task. The process of simplification and digitisation of tax administration, which has been initiated, remains a pre-requisite for a transparent and hassle-free tax system, it added. Identifying power shortage as the single most impediments to growth, the Survey said appropriate policy initiatives constituted the first and foremost challenge for speedy infrastructure development.

     It favoured liberalisation of FDI regime for captive mining as slowdown in mining sector was of concern, especially coal, which accounted for 60 per cent of the country's primary energy demand and 70 per cent of power generation. The management of lingering oil prices required rapid and bold policy responses, the Survey said regretting that the movement towards market determined prices in the hydrocarbon sector has floundered pending resolution of subsidies in domestic LPG and PDS Kerosene. Noting that fiscal policy was a critical component for high 8-10 per cent growth with macro economic stability, the Survey said high deficits, unproductive expenditure and tax distortions have constrained the economy from realising its full growth potential. Rejecting quick fix solution for propping up growth, it said there was much scope for better productivity in expenditure and greater growth through deepening the reform process for harnessing higher savings and investments. High and volatile global petroleum prices put an uncertainty in inflation outlook casting its shadow on the interest rate scenario, which may pose a risk of dampening the domestic investment boom. The fiscal risk, both at the Centre and state level, has led to expenditure compression of the wrong kind, it said, adding that the government should revert to meeting the FRBM target of reducing fiscal and revenue deficit by 0.3 and 0.5 per cent of GDP annually. While the worry about rapidly growing imports and burgeoning trade deficit appears to be misplaced, the Survey said higher import of capital and other essential inputs, in fact, would add to the export momentum in the future. The Survey calls for a shift in emphasis and focuses attention on the quality of outcome of the various social sector programmes dealing with health and education rather than their quantity or mere coverage.

     Overall investment in infrastructure continued to remain far below the requirement, and net capital stock, for example, in electricity, gas and water supply grew at a compound annual rate of 3.7 per cent between 1993-94 and 2003-04. The recently introduced public-private partnership (PPP) model had limited success in the area of electricity and mining, and the dominance of the public sector continued. On inflation the Survey said that the price stability was maintained despite an increase of 44.5 per cent in average headline world price of Indian basket of crude petroleum from 37.3 dollar per barrel in April-November 2004 to 53.9 dollar per barrel in April-November 2005, and 58.10 dollar per barrel on February 13, 2005. The virtuous expansion in the current phase of economic upturn has been maintained without an undue escalation of domestic prices. Inflation measured by a point-to-point increase in the Wholesale Price Index (WPI) declined from 5.7 per cent on April 2, 2005, to a low of 3.3 per cent on August 27, 2005. Despite increasing thereafter, prices have remained at comfortable levels with the WPI-inflation at 4.1 per cent on February 4, 2006 vis-`- vis 5.0 per cent on February 5, 2005, it sad.

Highlights of Economic Survey 2006-07

     New Delhi: The Economic Survey 2006-07 was released by the Finance Ministry today. The highlights of the survey are enlisted below:

     1. Economy projected to grow at 8.1% in 2005-06. 2. Modest inflation in spite of spiralling global crude prices. 3. Rapid growth in exports and imports. 4. Faster development of physical infrastructure. 5. Progress in fiscal consolidation. 6. Industry and services propel overall growth of the economy. 7. Industrial resurgence driven by manufacturing and construction sectors. 8. Broad-based Services sector growth. 9. Total foodgrains production projected to increase by 2.3% from 204.6 MT in 2004-05 to 209.3 MT in 2005-06. 10. Continued reduction in the incidence of poverty. 11. Pick up in investment and acceleration in growth strengthened in 2005-06. 12. Virtuous cycle of growth and savings likely to continue for some years to come. 13. Policy framework to harness the dormant talent pool of Indian work-force and entrepreneurs to position the economy on a sustained high-growth trajectory suggested. 14. Speedy provision of quality infrastructure through appropriate policy stimulus highlighted. 15. A reversal of the slowdown in the mining sector, particularly coal stressed. 16. Reform of the tax system favoured. The latest Economic Survey in an attempt to prune the fiscal deficit calls for improving the quality of expenditure, better productivity in expenditure and greater growth dividend through deepening the reform process that could harness higher savings and investment.

     Regarding the Securities Market, the Survey's highlights are enlisted as below: 1. Stock Market Index registers returns of 36 per cent in 2005 as against 11 per cent in 2004 2. Rs. 30,325 crore of resources raised in the primary market for equity in 2005 3. 55 Initial Public Offerings (IPOs), roughly 4 IPOs every month, issued in 2005 4. National Stock Exchange and Bombay Stock Exchange retain the world ranking at 3 and 5, respectively 5. From January 2002 to December 2005, Nifty Index goes up from 1075 to 2837 giving compound returns of 27.45 per cent per annum 6. Nifty Junior Index rise from 1349 to 5541 giving compound returns of 42.36 per cent per annum from January 2002 to December 2005 7. Market capitalization of Nifty at Rs. 13.5 lakh crore and Nifty Junior at Rs. 2.2 lakh crore adds upto Rs. 15.7 lakh crore or roughly two-thirds of the broad Indian equity market at the end of December, 2005 8. Impact cost for doing transactions in the Nifty and Nifty Junior drops steadily and sharply 9. Total equity market turnover goes up from Rs. 43 lakh crore in 2004 to Rs. 60.2 lakh crore in 2005 10. Number of depository accounts at National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL) stands at 85 lakhs 11. Number of depository accounts at NSDL continues to grow rapidly (72,76,300) with the rise of 21.9 per cent in 2005 which corresponds to over 5,000 accounts being opened per working day; 12,70,071 CDSL accounts in 2005. 12. Assets under management of all mutual funds rise to a level of roughly Rs. 2 lakh crore in 2005 in comparison to approximately Rs. 1.5 lakh crore in the previous year. 13. Number of Foreign Institutional Investors (FIIs) rises to 823 and number of sub-accounts stands at 2273 in December 2005 14. Net investments from FIIs on equity spot market rise to Rs. 47,182 crore in 2005 as against Rs. 38,965 crore in 2004 15. Turnover of commodity of futures in the four commodity exchanges of the country rises to Rs. 13.87 lakh crore in 2005.

     In the context of Agriculture the Survey highlights are enlisted below. 1. The Economic Survey for 2005-06 has estimated a growth rate of 2.3% in the agricultural production as against a lower growth rate of 0.7% during 2004-05. 2. The total food grains production is estimated to be 209.3 million tonnes in the year against 204.6 million tonnes in 2004- 05. 3. The Kharif production has been estimated at 105.3 million tonnes in 2005-06 against 103.3 million tonnes in 2004-05. 4. The production of Rabi food grains is expected to be around the previous years level of 101.3 million tonnes. 5. The Kharif oilseeds production for 2005-06 is estimated at 14.6 million tonnes as per first advance estimates while Rabi oilseeds production is estimated to reach the target level of 10.4 million tonnes with favourable weather. 6. The sugarcane output is estimated to increase to 257.7 million tonnes in 2005-06 against a level of 232.3 million tonnes in the previous year. 7. The cotton production may come down to 15.9 million tonnes from 17 million tonnes in 2004-05. 8.The Economic Survey terms horticulture, floriculture, organic farming, genetic engineering, food processing, branding and packaging and futures trading as the areas emerging with a potential for high growth. 9. The production of horticulture products was 164 million tonnes in 2004-05, contributing 28% of GDP from agriculture. 10. A shift from the current MSP and Public Procurement System and developing alternative product markets are essential for crop diversification and broad-based agricultural development.

    Regarding the Industries highlights, the survey enumerates: 1. Coal, electricity, crude petroleum, refinery throughput, steel and cement that havea direct bearing on infrastructure registered a growth of 4.5 per cent in April-December 2005 as compared to 6.4 per cent registered during the corresponding period of last year. 2. The recently introduced private-public partnership (PPP) model had limited success in the area of electricity and mining and the dominance of the public sector continued. 3. The targets of tele-density levels have been surpassed. The total number of telephones (basic and mobile) rose from 22.8 million in 1999 to more than 125 million at the end of December, 2005. 4. The overall figure of tele-density has risen from a mere 2.32 per one hundred population in 1999 to 11.32 in December 2005. 5. As on November 30, 2005, 6271 Kms of roads under Nationa Highway Development Project with the bulk of 5097 Kms. lying on the Golden Quadrilateral was completed, and another 6179 Kms. was under construction. 6. The cargo handled by the major ports achieved a 12.7 per cent growth upto December, 2005 as compared to 11.3 per cent registered in 2004-05 7. The International airports in Delhi and Mumbai are being modernised and upgraded through private sector participation. Construction work at green field airports of international standards at Hyderabad and Bangalore has commenced and these are likely to be operational by middle of the year 2008. 8. The Survey recommends further liberalization including allowing an associated coal mining company engaged in captive mining to sell excess coal to the appropriate end-user, allocating coal blocks for captive mining through price-based auctions and liberalization of FDI restrictions in joint ventures in captive mining. 9.The survey mentions that the total investment required in infrastructure is enormous and the Committee on Infrastructure, headed by the Prime Minister has estimated the investment requirements as Rs. 1,72,000 crore in the National Highways sector by 2012, Rs. 40,000 crore for Airports by 2010 and Rs. 50,000 crore for Ports by 2012. It is expected that a substantial share of this investment is to come from the private sector. 10.The Survey states that the policies and institutions need to be geared up to meet the specific requirements of the infrastructure sector in the country for which a well defined regulatory architecture has to be set up so as to increase the comfort level of different players in the market.

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