ECONOMIC GROWTH

 
The fiscal 2008-09 has been a difficult year for the global economy and for India in its efforts to sustain the newfound growth momentum of its economy. In the first half of the year there was a sudden spurt in the international commodity prices, in particular in mineral and edible oils which contributed double digit inflation in India. In the second half of the year, a crisis of unprecedented magnitude hit the financial markets in the industrialized economies, eventually pushing them into a recession. Most emerging market countries have slowed down significantly and India has also been affected. As per the Revised Estimates of National Income for 2008-09 (at constant 1999-2000 prices), released by the CSO the growth of Gross Domestic Product at factor cost is estimated at 6.7 percent in 2008-09, with agriculture & allied activities growing at 1.6 percent, industry at 3.9 percent and services sector at 9.7 percent.

Development in Prices and Inflation- Inflation, measured by variations in the Whole sale Price Index on a year to year basis, eased sharply from its intrayear peak of 12.9 percent on August 2, 2008 to 0.8 percent by March 28, 2009.

Agriculture- During South-West monsoon of 2008, country as a whole received 2 percent less rainfall of LPA. The spatial distribution of seasonal monsoon rainfall during 2008 was largely uniform. Total foodgrain production in 2008-09 as per the second Advance Estimates is estimated at 229.85 million tonnes against the target of 233 million tonnes. Kharif foodgrain production is estimated at 118.79 million tonnes and Rabi production at 111.06 million tonnes as against the target of 12.54 million tonnes and 111.46 million tonnes, respectively.

Industry- During 2008-09, as per the Index of Industrial production (IIP), the industrial sector grew at 2.6 percent (provisional) compared to 8.5 percent during the previous year. This slowdown in growth occurred in all the three broad sectors, manufacturing, mining and electricity, which grew at 2.5, 2.6 and 2.8 percent respectively during 2008-09.

Infrastructure- The overall index of six core industries having a direct bearing on infrastructure registered a growth of 2.7 percent (provisional) during 2008-09. This is lower than the 5.9 percent growth registered during 2007-08.

Monetary trends and developments- The 2008-09 was a year when the monetary policy saw a mid-course correction, from a tight policy regime in the first half, to an expansionary phase in the second. A major challenge of the monetary policy was to contain the spillover effect of the global financial crisis. As against a growth of 21.2 percent in March end 2008, broad money (M3) increased at a lower rate of 18.4 percent in 2008-09. This is slightly lower than the projected target of 19.0 percent for 2008-09.

Bank credit- Gross bank credit by scheduled commercial banks comprising food and non-food credit, increased by 17.5 percent in the 2008-09 compared with 22.3 percent in the corresponding period last year. Food credit grew by 4.1 percent during 2008-09, compared to a decline of -4.6 percent during the same period of the previous year.

External sector- Beginning from a low level of US$5.8 billion at end-March 1991, India’s foreign exchange reserves increased to a peak of US$314.61 at end May 2008. Reserves, however, have declined since then. The foreign reserves stood at US$ 252.0 billion at the end of March 2009. Several factors have resulted in decline in the value of Rupee from an average of Rs 40.02 in April 2008 to Rs 51.23 per US dollar in March, 2009, reflecting 21.88 percent depreciation in rupee.

At end December 2008, India’s total external debt outstanding was US$ 230.9 billion, reflecting an increase of US$ 24.9 billion over the year.

Social sector development- Expenditure of the central government on social services including rural development increased from Rs. 39,736 crore in 2001- 02 to Rs. 1,09,585 (RE) crore in 2007-08 and Rs. 1,75,111 crore in 2008-09 (RE). The total expenditure on social sectors of the general governments (combined centre and state governments) as a percentage of GDP also increased from 5.77 percent in 2002-03 to 6.27 percent in 2008-09 (BE).