India's economy is on
the fulcrum of an ever increasing growth
curve. With positive indicators such as a
stable 8 percent annual growth, rising
foreign exchange reserves of close to US$
140 billion, a booming capital market with
the popular "Sensex" index topping the
majestic 10,000 mark, flowing foreign direct
investment (FDI) close to US$ 8 billion, and
a more than 20 per cent surge in exports, it
is easy to grasp why India is a leading
destination for foreign investment.
Highlights of the Indian Economy in 2005-2006
The GDP grew by 7.4 per cent in the first
quarter and 6.6 per cent in the second
quarter of the current year, compared with
5.3 per cent and 8.6 per cent in the
corresponding quarters of the previous year.
The Economic Survey 2005-06 estimates that
the GDP will grow at 8.1 per cent. Growth of
Gross Domestic Product (GDP) at constant
prices in excess of 8.0 per cent has been
achieved by the economy in only five years
of recorded history, and two out of these
five are in the last three years.
Prospects of agricultural production in
2005-06 are considered to be reasonably
bright due to near normal monsoon. The
agricultural and allied sector's growth in
2005-06 is projected at 2.3 per cent.
With a good crop prospects, food grain
production is expected to increase to 209
million tones (MT) in 2005-06 from 204.6 MT
in 2004-05.
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.
The industrial sector too has been on a
high. The rate of growth of industrial
sector as measured in terms of Index of
Industrial Production (IIP) during
April-December 2005-06 was 7.8 per cent.
Impressive performance of the manufacturing
sector, which grew at 8.9 per cent during
this period, largely contributed to these
figures.
Perfect recipe for growth
India is the world's second largest
producer of food next to China, and has the
potential of being the biggest in the world.
Food processing is a key industrial sector
for India, it accounts for a gross output of
more than US$ 69.4 billion, out of which
value-added food products comprise US$ 22.2
billion.
Size of the semi-processed and ready to eat
packaged food industry is over US$ 1
billion, and it is growing at over 20 per
cent a year. The total processed food
production in India is likely to double in
the next ten years.
In Q3FY06, the total net profit of 12 major
companies increased 174.83 per cent to US$
15.8 million from US$ 5.75 million in
Q3FY05. The total sales of this group
increased by 20.23 per cent to US$ 261.56
million during October-December 2005.
Industrial Growth
Industrial growth is driven by robust
performances from manufacturing and
construction sectors. Within industry, while
manufacturing growth has accelerated
steadily from 7.1 per cent in 2003-04 to 9.4
per cent in 2005-06, construction growth has
been in double digits in each of the last
three years.
Substantive commercial bank credit flows to
the housing and real estate and retail
sectors continue to provide support to the
boom in construction and consumer durables.
India's merchandise exports (in US
dollar terms and customs basis) have
been recording annual growth rates of
more than 20 per cent since 2002-03. In
2004-05, such exports grew by 26.2 per
cent – the highest annual growth rate in
the last three decades – to cross US$ 80
billion. Five major sectors – gems and
jewellery, engineering goods, petroleum
products, ores & minerals, and chemicals
and related products – were the key
drivers.
Despite recording a somewhat lower rate
of growth of 18.9 per cent, exports
during April-January 2005-06 have
already reached US$ 74.9 billion and are
well on their way to achieve the US$ 92
billion target set for 2005-06.
Services exports grew by 71 per cent
in 2004-05 to US$ 46 billion, and 75 per
cent to US$ 32.8 billion in
April-September, 2005. In 2004-05,
software service exports grew by 34.4
per cent to US$ 17.2 billion and by 32
per cent to US$ 10.3 billion in the
first half of 2005-06.
The manufacturing and the services sector
have become a major driving force for the
Indian economy. With both of them on a
searing growth path, one can concur that
India can aim towards a nominal growth rate
of 12 per cent.
