• Agri sector wilts on poor capital investment

    AGRICULTURE: Growth declines to 2.6% in 2007-08 from 3.8% last year. Presenting a grim picture of agriculture, the Economic Survey projects a decline in the growth of the sector in 2007-08 to 2.6 per cent compared with 3.8 per cent last year. It attributes the poor performance to reduced capital investment and plateauing of yields of major crops, besides the weather-induced productivity fluctuations. The survey also expresses concern over the slowdown in the creation of irrigation potential, degradation of natural resources, and collapse of the farm extension system, which together contributed to below-potential crop yields. It points out that the public investment in agriculture has declined and the sector has not been able to attract private investment because of lower and unattractive returns. The share of agriculture in the total gross capital formation (GCF) has dropped steadily from 10.2 per cent in 2001-02 to 5.8 per cent in 2005-06. However, the share of the GCF in agriculture in relation to the agriculture sector's gross domestic product (GDP) has shown marginal improvement from 11.1 per cent to 12.5 per cent during this period. The overall share of agriculture in the country's GDP, which used to be as high as 36.4 per cent in 1982-83, has dropped to nearly half of that and is reckoned at 18.5 per cent in 2006-07. Referring to the foodgrains production, the survey points out that though in the longer period (1950-51 to 2006-07) the average annual growth rate in foodgrains output works out to 2.5 per cent that is higher than the population growth of 2.1 per cent, but the situation has deteriorated after 1990-91. The growth rate between 1990 and 2007 works out to only 1.2 per cent, falling below the population growth of 1.9 per cent during the period. This has resulted in a decline in the per capita availability of cereals and pulses. "The per capita consumption of cereals declined from a peak of 468 grams per capita per day in 1990-91 to 412 grams in 2005-06, indicating a decline of 13 per cent during this period. The consumption of pulses declined from 42 grams per capita per day (72 grams in 1956-57) to 33 grams during the same period,' the survey states. The pace of creation of additional irrigation potential came down sharply from an average of about 3 per cent a year between 1950-51 and 1989-90 to 1.2 per cent in the Eighth Plan, 1.7 per cent in the Ninth plan and 1.8 per cent in the Tenth Plan. The survey also concedes that the new initiatives taken in the Tenth Plan for extending irrigation potential have had a limited success. While the creation of new potential remained confined to around 8 million hectares, its actual utilisation was even lower, only about one-fourths of it. The survey has stressed the need for a second green revolution, particularly in the rainfed areas, to improve the incomes of more than half of the country's workforce employed in this sector. "Acceleration of growth of this sector will not only push the overall GDP growth upwards, it would also make the growth more inclusive and biased in favour of women,' it maintains.

  • Low procurement stares depleted silos

    FOOD MANAGEMENT: Foodgrain stock at 19.2 MT on January 1 this year is 4% lower than the buffer norm of 20 MT. The Economic Survey 2007-08 points to the lower than normative foodgrain stocks for the third consecutive year, caused mainly by the decline in procurement of wheat and rice and their increased offtake under the targeted public distribution system. The foodgrain stock stood at 19.2 million tonnes (MT) as on January 1, 2008, comprising 11.5 million tonnes of rice and 7.7 MT of wheat, respectively. This stock is 4 per cent lower than the buffer norm of 20 MT. Last year, only wheat stock was short of buffer norm. While wheat stock of 7.7 MT is 500,000 tonnes lower than the required norm, the rice stock stood at 11.5 MT, that is 300,000 tonnes lower than the norm. According to the survey, the main reason behind the decline in stocks was due to lower procurement in both wheat and rice. The survey attributes the decline in wheat procurement to low production, lower market arrivals, high market ruling prices, negative market sentiments due to low stocks in the central pool, and aggressive purchase by the private traders. It acknowledges that the increase in government procurement price by Rs 150 a quintal during the 2007-08 marketing season helped wheat procurement to a small extent. The procurement rose by 20.65 per cent to 11.1 MT but the government had to contract imports of 1.8 MT at high rates to meet the consumption requirement. This was the second consecutive year of wheat import. However, rice procurement also fell marginally to 26.3 MT during 2006-07 from 26.7 MT during 2005-06. However, in the ongoing 2007-08 season, procurement till December has been marginally better than the previous season's corresponding purchase. The increase in paddy procurement price by Rs 125 a quintal has helped rice availability in the central pool this year. The regulation of rice export by putting a price cap has also contributed. The offtake of both wheat and rice increased marginally in the April-December period of 2007-08. Wheat offtake during the period was 8.2 MT (against 7.7 MT in the previous year's corresponding period) while the rice offtake was 16.7 MT (versus 15.9 MT in the year before).

  • Assessing the Budget

    Any Budget can be evaluated on a number of criteria. Here, briefly, is a check-list of benchmarks by which today's pronouncements can be scored. First, from the perspective of the finance ministry's own domain, we need to look at what it does on the fiscal front. Mr Chidambaram has shown complete commitment to the mandate of the Fiscal Responsibility and Budget Management (FRBM) Act, to cap the fiscal deficit while eliminating the revenue deficit. The latter is the greater challenge and his convergence towards the zero-deficit target will be a significant yardstick. Beyond the aggregate numbers, he has also indicated his commitment to taking the country to a full-fledged Goods and Services Tax (GST), which will involve a series of rate rationalisations and re-balancing as far as indirect taxes are concerned. These should be watched out for. Second, broadening the scope of evaluation to macro-economic performance, the Budget must be seen in terms of what it does to sustain rapid economic growth, especially in the context of the global as well as Indian slowdown that has set in. To deal with the cyclical effects, he needs to pump money into programmes that will quickly spend it, thus achieving pump-priming. Critical to longer-term growth is the stepping up of investment in infrastructure, not just in terms of financial commitments but also in creating effective vehicles for implementation in the public and private sectors. Even with all the good intentions of the government in play, the infrastructure gap is not narrowing. Third, the ruling coalition's emphasis on inclusive growth is beyond being a political slogan; inclusiveness is a critical component of a sustainable growth path. This needs to be tackled at several levels. Transfer payments to provide households a secure and minimum level of subsistence need to be combined with longer-term programmes that build capabilities and earning capacity. The Economic Survey has shown that, despite doubling social sector spending over the past four years, the country's position vis-

  • Sustaining 9 p.c. growth will be tough: Survey

    Favours partial sale of profit-making non-navaratna PSUs, and tackling of inflationary impulses Holding out a warning that the current slowdown in the U.S. would have an effect on the Indian economy, the Economic Survey 2007-08 maintained that sustaining a high GDP growth of nine per cent while reining in inflation would be a tough challenge. Tabled in Parliament by Finance Minister P. Chidambaram on Thursday, the Government's pre-Budget annual economic progress report said that in the current uncertain scenario, an increase in the overall growth to double digits would entail additional reforms and came out with a policy prescription. Among the various measures suggested to sustain the high growth momentum, the Survey favoured partial sale of the identified profit-making non-navaratna public sector undertakings (PSUs), phasing out control on sugar, fertilizer and drugs, sale of old oilfields to the private sector, a higher share for foreign equity in retail trade and further opening up of the banking and insurance sectors to foreign direct investment (FDI). With the economy projected to grow at 8.7 per cent during the current fiscal, the Survey pointed out that the lower growth represented a deceleration from the unexpectedly high growth of 9.4 and 9.6 per cent in the preceding two years. "Maintaining growth rate at nine per cent will be a challenge and raising it to two digits will be an even greater one,' the Survey said. Linking the huge accumulation of foreign capital inflows as the reason for the pressure building up on prices, the Survey said that inflationary impulses from global commodity prices must be tackled through use of fiscal and trade policy instruments. Inflation this fiscal is projected to return to the earlier level of 4.4 per cent, down from 5.4 per cent in 2006-07. Deceleration in growth this fiscal appears to have spread across all sectors except electricity, community service and services such as trade, hotels, transport and communications. More significantly, the slowdown in the farm sector growth is attributed to the sluggish trend witnessed in rabi crops. Also, other sectors like manufacturing and construction which grew at 12 per cent in 2006-07 dropped by 2.5 percentage points in the current year. "The slower growth of consumer durables was the most important factor in the slowdown of manufacturing,' the Survey said. As for the external sector, the U.S. economy is expected to slow down in 2008 as a fall-out of the sub-prime mortgage crisis. In fact, most projections of global economies anticipate a moderate and not severe slowdown. "This will impact all countries including India, depending on the importance of the slowdown in different countries and importance of the country in our exports,' the Survey concluded, while pointing out that a further fall in exports to the U.S. might be unavoidable but would be relatively modest. On the flip side, the Survey viewed that one of the implications of the U.S. sub-prime crises would be increased capital inflows into India and other emerging markets. "Thus the situation of excess inflows is likely to remain, though the pressure on reserve accumulation and exchange rate appreciation is likely to ease. Any reduction in excess capital flows from the high levels in 2007 may affect the equity markets in the short-term, but will make the task of monetary management easier,' it said.

  • Cautious optimism

    The central theme of Economic Survey 2007-08 is maintaining the strong economic growth momentum of the recent period. With the annual GDP growth exceeding 8 per cent since 2003-04, the economy has moved decisively to a higher trajectory. The official forecast of 8.7 per cent for 2007-08 accords with this trend. But the figure suggests a slight deceleration, considering that the first six months of the year recorded a growth of 9 per cent or more. For 2008-09, most official forecasts have pegged the rate at 8.5 per cent or less. The key task is to regain the upward push so that the economy averages a 9 per cent or even higher growth towards the end of the 11th Plan. There are both positive and negative factors that would shape the near-term outlook. Macroeconomic fundamentals continue to inspire confidence. A sharp acceleration in the domestic investment and savings rates has sustained the high growth. Buoyant tax revenues have helped in fiscal consolidation so far. The budget will show if the government's finances are on track to meet the goals set under the Fiscal Responsibility and Budget Management Act. Inflation however remains a major worry. Over the past year global factors, notably the high prices of oil, food and other commodities as also the turmoil in financial markets have clouded the external environment. Appreciation of the rupee and a slowdown in specific segments of industry as well as in infrastructure are some of the other major areas of concern. For sustaining economic growth at high levels, policy makers are up against several challenges. Additional reforms are obviously needed. Capital inflows, especially those relating to direct investment, are expected to continue in the medium-term. Combating inflation has become more complex in the context of recent structural changes in the economy and its increasing globalisation. Among the important factors to be reckoned with are the high tariffs on agricultural products, the large share of food in the consumption basket, and the slow modernisation of agriculture and allied activities. Inadequate availability of infrastructure continues to be a major constraint on the supply side. Highlighting the need to improve social sector and human development outcomes at the level of the States, the Survey lays stress on improved delivery mechanisms for the success of programmes such as the NREGP and Bharat Nirman. In a departure from the past, Survey 2007-08 has sought to provide a more rigorous analysis and a conceptual framework, and has added a new chapter that covers subjects of topical interest. That along with the proposal to release background papers will help in disseminating timely economic information to a larger audience.

  • Chidambaram hopeful of 9 p.c. growth

    Union Finance Minister P. Chidambaram after presenting the Economic Survey 2007-08 in Parliament on Thursday. With the country's economic fundamentals strong and investment climate full of optimism, Finance Minister P. Chidambaram on Thursday exuded confidence on achieving an average GDP growth of nine per cent during the Eleventh Plan period (2007-08 to 2011-12) while reining in inflation alongside. As for the outlook for 2008-09, Mr. Chidambaram said: "Optimism, but with caution, is the watchword' while commenting on the policy prescriptions of the Economic Survey 2007-08 which projected a lower GDP growth of 8.7 per cent for the current fiscal and, in that light, viewed sustenance of a high growth as a daunting task. Speaking to newspersons immediately after tabling the Survey in Parliament, Mr. Chidambaram pointed out that the country was required to respond to the evolving global economic situation so as to ensure that its growth was not affected and this, he said, could be achieved by capitalising on the opportunity arising from the "favourable' conditions. "I am optimistic about growth and containment of inflation in the coming year [2008-09],' he said, while noting that his priority was to provide a conducive investment climate and manage the macro economy to facilitate non-inflationary growth. Reading out from a prepared statement which was later released to the press, Mr. Chidambaram said: "Keeping inflation under control in an uncertain global environment will be one of the major challenges in 2008-09.' He noted that the current slowdown and possible recession in the global economy posed risks to growth. On the rise in domestic savings and investment, the Finance Minister said: "We are confident of meeting the 11th Plan target of 9 per cent average growth.' The high GDP growth, he said, had benefited the common man as well, as this was reflected by a near doubling of the annual growth rate of per capita consumption to 5.1 per cent in 2007-08 compared to 2.6 per cent for the previous 11 years. "If the rate of growth of per capita GDP continues at the five-year average of 7.2 per cent per year, the average income would now double in a decade instead of a generation or more, earlier,' he said. Expressing concern over the slow pace of growth in the farm sector and bottlenecks in infrastructure development, he stressed the need for mobilising public and private resources for "inclusive' growth. In a note of confidence, the Finance Minister said: "I am optimistic about growth and containment of inflation in the coming year. It will be my priority to continue to provide a conducive investment climate and manage the macro economy to facilitate non-inflationary growth. We have to ensure that the benefits of this growth percolate to the most marginal and vulnerable segments of society.'

  • Due allocation for education still an elusive goal

    Not only is the United Progressive Alliance far from delivering on its National Common Minimum Programme (NCMP) promise of allocating six per cent of the Gross Domestic Product to education but the allocation also dipped in percentage terms in 2007-08 compared to the preceding year. According to the Economic Survey 2007-08, the Budget Estimates of the expenditure on education stood at 2.84 per cent of the GDP in the current fiscal. In 2006-07, the expenditure as per the Revised Estimates was 2.88 per cent. Though the expenditure on education as a percentage of the GDP in the past two years was higher than the first two years of the UPA rule, it still falls short of the 2.9 per cent achieved in 2002-03 during the National Democratic Alliance regime. In the NCMP, the UPA pledged to raise public spending on education to at least six per cent of the GDP in a phased manner. Starting lower than 2.74 per cent of the GDP in the last year of NDA rule (2003-04), the allocation in 2004-05 was 2.67 per cent. Though it went up to 2.69 in 2005-06 and stood at 2.88 per cent in the Revised Estimates for 2006-07, the allocation is still below the halfway mark of the promised target. Last year the Planning Commission, in fact, said India could hope to achieve the target

  • Face infrastructure challenges squarely to sustain growth'

    While pointing out that the overall performance of the infrastructure sector of late has been

  • Striking a note of caution

    India's growth is unlikely to slip below the 9% rate in the next few years, says the finance ministry's Economic Survey, but the downside risks have become stronger this year. Among those risks are the international subprime crisis and a slackening of growth in agriculture and manufacturing within the country. The other is the political opposition, because of which the Survey tabled in Parliament by finance minister P Chidambaram on Thursday has had to tuck away its 12-point list of reforms in a box, outside the main narrative. The more significant of these reforms are in the financial sector: allowing the public float of at least 10% in all public sector units, permitting FDI in retail, raising the FDI cap in insurance, besides 100% foreign investment in greenfield rural agricultural banks. The Survey says if the current growth trend persists "

  • India has ample wheat stocks

    India, the world's biggest producer of wheat after China, has enough stockpiles of the grain to meet demand, a finance ministry report said before tomorrow's federal budget announcement. The state-run warehouses had 7.7 million metric tonne on January 1, the report issued on Thursday in New Delhi said. When combined with the arrival of imported wheat, supplies will be sufficient in the financial year ending March 31, the report said. Still, the South Asian nation may import 2 million tonne in the year starting July 1 after dry weather pared output, the US Foreign Agricultural Service said. The country bought 1.8 million tonne a year earlier, supporting a rally in prices of wheat that topped $12 a bushel for the first time in Chicago this week. Wheat for May delivery fell as much as 27.25 cents, or 2.2%, to $12.2275 a bushel in after-hours trading and stood at $12.45 at 12:05 pm Singapore time. The price on Wednesday rose as much as the expanded daily trading limit of $1.35, or 11%, to a record $13.495 after plunging by the same permitted amount. India's production may drop 1.3 million tonne to 74.5 million tonne in the March-April harvest after farmers planted the crop on a smaller area compared with a year ago, the Foreign Agricultural Service said in a report dated February 20. The government, which needs 1 million tonne of the grain each month to distribute to the poor, will start purchases of the new crop in April. It plans to buy 15 million tonne from the farmers, up 35% from a year earlier.

  1. 1
  2. ...
  3. 4497
  4. 4498
  5. 4499
  6. 4500
  7. 4501
  8. ...
  9. 4533