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Economic Survey 2004-2005


Review of Developments

c) Production

1.45 According to the second advance estimate of total foodgrains production, foodgrains output is expected to decline to 206.4 million tonnes in 2004-05 from 212 million tonnes in the previous year, with shortfalls in the output of coarse cereals and pulses. Output of rice and wheat is actually projected to be higher than last year's. Horticulture, consisting of fruits and vegetables, spices, floriculture and coconuts, together with livestock, poultry and fisheries contribute more than 60 per cent of GDP from agriculture and allied sector, and these sub-sectors appear to be doing well in the current year. A bumper harvest of cotton in 2004-05, with output up almost 24 per cent from last year, augurs well for the cotton textile industry. With deficient rainfall in parts of Maharashtra in the current year, production of sugarcane is likely to continue its downward trend for the third consecutive year.

1.46 Industrial sector, as per the Index of Industrial Production (IIP), registered an impressive growth of 8.4 per cent in the first three quarters of 2004-05, the highest after 1995-96. Vis--vis the corresponding period of the previous year, there is improvement in all the broad groups by sources of production as well as by use-based classification. This improvement is particularly pronounced in manufacturing, and in capital goods and consumer durables. The broad-based improvement also implies an improvement in both investment and consumption demand.

1.47 The year started on a buoyant note with an annual growth of 8.9 per cent in the IIP in April 2004. The slowdown in annual growth in May 2004 to 6.8 per cent proved transient, and growth accelerated in each of the following months to peak at 9.8 per cent in October. The decline in IIP growth to 7.7 per cent in November 2004 again was reversed in December when growth rebounded to 7.9 per cent. The positive development on the industrial front is most pronounced in manufacturing. During 2004, annual growth in manufacturing, after declining from 8.8 per cent in April to 7.5 per cent in May, consistently accelerated every month to reach double-digit levels in September and October. Within manufactured goods, capital goods and consumer durables continued to demonstrate vibrancy by registering double digit year-on-year growth rates in each of the first nine months of the current year except in May for consumer durables. In September 2004, growth in capital goods and consumer durables was satisfactorily high at 16.8 per cent, and 20.6 per cent, respectively.

1.48 Out of the seventeen industry groups at the two-digit level of classification, in April-December 2004, four registered double-digit growth; four grew between 5 and 10 per cent; and six grew between 0 and 5 per cent. Three key groups, namely, machinery and equipment other than transport equipment, other manufacturing industries not included elsewhere, and basic chemicals and chemical products (except products of petroleum and coal) with aggregate weight of about 32.9 per cent in the manufacturing sector and 26.1 per cent in the total IIP, recorded impressive growth rates of 21.9 per cent, 19.4 per cent and 15.7 per cent, respectively. Food products, jute and other non-cotton vegetable fibres, and wood and wood products, furniture and fixtures, with a total weight of 15.6 per cent in the manufacturing sector and 12.3 per cent in IIP, were the only sectors that registered negative growth in the first three quarters of the current year.

1.49 There are some encouraging signals in the first nine months of the current year from the Indian textiles industry regarding its preparedness to meet the challenges in a quota-free world trade regime in textiles from January 1, 2005. IIP for textile products (including wearing apparel) grew by 14.8 per cent in April-December 2004 compared to a decline of 2.8 per cent in the corresponding period of the previous year. Cotton textiles also improved its growth performance by an even bigger 14 percentage points to 8.3 per cent in the first nine months of the current year compared to a decline of 5.7 per cent a year ago. The investment intentions for the current year suggest a consolidation of the growth process in the textile sector.

1.50 The automobile and auto-component industry performed well in 2003-04. The increase in sales turnover of auto-components in 2003-04 was 20.0 per cent. The satisfactory trend appears to continue in the current year with, for example, the automobile industry increasing the production of total vehicles to 6.2 million in the first nine months of the current year from 5.2 million in the corresponding period of the previous year. Output of electronics and information technology (IT) industry is estimated to have grown by 18.2 per cent to Rs. 1,14,650 crore in 2003-04. During April-December 2004, production of steel increased to 28.3 million tonnes and recorded a growth of 4.0 per cent over the corresponding period of the previous year. During April-December 2004, production of cement at 96.3 million tonnes was 6.81 per cent higher than the production in the corresponding period of last year.

1.51 Six core industries (electricity, coal, finished steel, cement, crude oil and petroleum products), with important forward linkages with the rest of the economy, and having a weight of 26.68 per cent in the IIP, registered a lower average growth of 5.4 per cent during April-December 2004 compared to 5.8 per cent in the same period in 2003. The decline is on account of a sharp fall in the growth of finished steel. Among the other infrastructure sectors, goods traffic on railways (7.7 per cent), cargo handled at major sea ports (11.1 per cent) and airports (18.3 per cent), and air passenger traffic (21.8 per cent) experienced higher growth rates in April-December 2004 as compared to the same period in 2003.

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