Growth Trends

Sectors Gaining Most

These sectors included basic metal and alloy industries (19.0%), transport equipments and parts (18.6%), textile products (16.8%), machinery and equipments (14.8%), beverages, tabacco and related products (13.4%), non-metallic mineral products (12.7%) and basic chemicals & chemical products (10.5%). Industries where production declined were three in number including jute and other vegetable fibre textile, wood and wood products, and leather and leather & fur products.

Sectors going into negative growth

Spurred by strong investment activity, the capital goods segment registered a phenomenal growth of 18.6% during April to August 2006 as compared to the corresponding figure of 13.8% last year. However, there has been a marginal deceleration in the consumer goods segment, with the growth rate standing at 11.3% during April to August 2006, down from the corresponding period last year’s figure of 13.7%. This slowdown can be attributed to the deceleration in the consumer non-durables growth that outweighed

 Agriculture

With 26 of the 36 meteorological sub-divisions of the country receiving normal to excees rainfall during June 1, 2006 to September 27, 2006, the agriculture growth prospect for the current year appears optimistic. As against a growth a growth rate of 0.7% in 2004-05, agriculture posted a growth of 3.9% in 2005-06 and with reasonably good monsoon, this upturn is expected to sustain its momentum into the current year.

However the total area under cultivation during 1st June 2006 to 29th September 2006 was lower by 20.5 lakh hectares compared to the area cultivated during the same period of last year. The few crops that saw a marginal increase in sown area included cotton, maize, soyabean and Kharif pulses.

The total stock of food grains has also registered a slight decline. As on 1st August 2006, the stock of food grains stood at 17.21 million tones, which was lower by 17.9% than the level of 20.97 million tonnes as on August 1, 2005.

The net tax collection of the Central Government posted a growth rate of 39.3% during April to August 2006, higher than the 27.9% increase in the corresponding period of the previous year. The non-tax revenue collection also showed a perceptible improvement, which grew at 10.7% higher than the negligible 0.2% growth in the corresponding period of the previous year. Total revenue receipts went up by 31.3% during April to August 2006.

 Inflation

Annual inflation rate, after surging of 6.4% in 2004-05 from 5.4% in 2003-04, went down to 4.4% in 2005-06. The WPI figures for the months to April to September 2006 indicate stabilization in the inflation rate during the current year. The WPI for all commodities during the first half of the current fiscal stood at 4.7% same as the corresponding figure of last year.

Strong and sustained growth in the manufacturing sector needs to be supported for creating growth and employment opportunities in the overall economy.

 Need for increased capital investment with priority to upgrade infrastructure.

 Promote India as preferred international headquarter of entrepreneurs.

 Create Common Indian Market for growth & Competitiveness.

 Reduction in the excise duty to encourage higher industrial growth.

 Initiating the integration of multiple Indirect taxes under GST.

 Food Processing: The Unexplored Territory

The level of processing and value addition is significantly lower than developed countries and many developing countries. The processed food industry is set to grow at more than 10% per annum driven by consumer demand, organized distribution and policy initiatives by the Government

It is important to note that the Government has already emphasized on a number of occasions that promotion of agri business is one of its key thrust areas in the overall plan of economic development of the country, in view of the fact that agriculture sustains more than 60% of the population of the country. While India is the 3rd largest agri producer in the world, India’s share in the global export of agricultural products, which is estimated at more than US$ 500 bn, is just about 1.5% and the rate of growth is also stagnating at 4%.

The government has rightly recognized that it is essential to promote investment in the food processing sector so as to ensure that it leads to increase in India’s share in the global trade of agricultural products, generates employment for large number of people, increase the income of the farmers, and contribution to the overall economy of the country.

 Textiles: The Employment Generator

India’s fiber mix in exports is around 18% MMF and 65% cotton. In contrast, global trade is 60% in MMF. There is strong global correlation between increased MMF output and growth of textile exporters. Failure to correct fiber imbalance will mean that India’s export target of US $ 40 bn by 2010 can never be met.

There is a need to remove distortionary exemptions from CENVAT chain to reach a fiber neutral fiscal regime. This will create a level playing field and will induce growth in domestic consumption and investment.

There should be progressive convergence between the excise duty regimes for competing fibers. As such Cotton fibers should be brought into excise purview @ 4% at the mill consumption stage.