Economic Survey of India 2012-13: Industry and Services Sector
Growth of value added in industrial sector, comprising manufacturing, mining, electricity and construction sectors, slowed to 3.1 percent in 2012-13.
Union Finance Minister P. Chidambaram on 27 February presented the Economic Survey 2012-13 in the Lok Sabha of the Parliament. Economic Survey is presented every year, just before the Union Budget. It is a flagship annual document of the Ministry of Finance, Government of India.
After recovering to a growth of 9.2 percent in 2009-10 and 2010-11, growth of value added in industrial sector, comprising manufacturing, mining, electricity and construction sectors, slowed to 3.5 percent in 2011-12 and to 3.1 percent in 2012-13.
The manufacturing sector, the most dominant sector within industry, also witnessed a decline in growth to 2.7 percent in 2011-12 and 1.9 percent in 2012-13 compared to 11.3 percent and 9.7 percent in 2009-10 and 2010-11, respectively.
The growth in electricity sector in 2012-13 has also moderated. The growth of the mining sector in 2012-13 is estimated at 0.4 percent, though it showed an improvement over a negative growth of 0.63 percent recorded in 2011-12.
India is one of the top ten manufacturing countries though its share in total manufacturing value added (MVA) is only about 1.8 percent. The growth rate of world MVA had declined from 5.4 percent in First quarter of 2011-12 to 2.2 percent in second quarter of 2012-13. The latest competitive industrial performance index (CIP) compiled by the United Nations Industrial Development Organization (UNIDO), ranks India 42nd out of 118 countries the same as in 2005.
The initiatives taken for boosting the manufacturing sector included National Manufacturing Policy (NMP), DMIC Project, FDI Policy initiatives and setting up of the e-Biz Project to promote ease of doing business.
The Centre for Monitoring Indian Economy’s (CMIE) analysis of the sector-wise performance of services activities based on firm-level data show that the performance of sectors such as transport logistics, aviation and construction in the year 2012-13 is subdued in comparison to with the previous year.
High negative PAT (profit after tax) in hotel sector continued. The health services and telecom sectors were projected to have rebounded in the year 2012-13. Overall the year 2013-14 is projected to be better for most of the sectors, except retail trading, which is projected to have negative growth in profitability.
FDI in multibrand retail trading has been permitted subject to specified conditions.
The IT and ITeS sector has started facing competition from many developing countries. While the EU has the highest share in computer and information services exports, followed by India and the USA, many new competitors like China, Israel and the Philippines have emerged in recent years.
Between 2005 and 2011, the annual average growth of computer services was 69 percent in the Philippines, 28 percent in Sri Lanka, 59 percent in Ukraine, 27 percent in the Russian Federation, 37 percent in Argentina and 35 percent in Costa Rica.
One major issue in services is the domestic barriers and regulations. Domestic regulations in strict WTO terms include licensing requirements, licensing procedures, qualification requirements, qualification procedures, and technical standards but here other restrictions and barriers are also considered.
An indicative list of some important domestic regulations in India which need to be examined for suitable policy reforms in the services sector include Trade and Transport services, Construction, Accountancy services, Legal services and Education Services.