indian economy 2010
September 26, 2006 2:12am CST
gdp growth, infrastructure growth
30 Sep 06
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 tonnes (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 spiralling 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.