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Economic Survey 2005-2006

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Infrastructural inadequacies continued to constrain the full potential for industrial resurgence, pick up in investment and buoyant exports. The growth of power generation in April-December 2005 at 4.7 per cent was lower than not only the annual target but also the 6.5 per cent achieved in the same period of the previous year. In the first three quarters of the current financial year, the overall index of six core industries – coal, electricity, crude petroleum, refinery throughput, steel, and cement – having a direct bearing on infrastructure, registered a growth of 4.5 per cent, relative to the 6.4 per cent registered during April-December, 2004.

Overall investment in infrastructure continued to remain far below the requirement, and net capital stock, for example, in electricity, gas and water supply grew at a compound annual rate of 3.7 per cent between 1993-94 and 2003-04. The recently introduced public-private partnership (PPP) model had limited success in the area of electricity and mining, and the dominance of the public sector continued.

Indications are that the slower progress in fiscal consolidation at the Centre in the current year may be made up by faster progress on this front by the State Governments and result in an overall improvement in the financial health of the General Government, that is the Centre and the States combined. Buoyant revenues in the States and significant improvement in the combined fiscal position of States in 2004-05 (RE) indicate that the process of deepening of the fiscal reforms and restructuring of public finances as envisaged by the Tenth Finance Commission (TFC) have had a head start.

Total foodgrains production is projected to increase by 2.3 per cent from 204.6 MT in 2004-05 to 209.3 MT in 2005-06. The decline in the kharif output of coarse cereals since 2003-04 is expected to continue in the current year.

The pick up in industrial output observed since the second quarter of 2003-04 has continued. As per the index of industrial production (IIP), during the period April-December, 2005, growth was 7.8 per cent compared to a growth of 8.6 per cent in the corresponding period of 2004. The current year has been characterised by vigorous growth of manufacturing. Within manufacturing, a faster growth of the capital goods sector at 15.7 per cent in April-December 2005 relative to the growth in 13.8 per cent in the corresponding period of the previous year provided strong corroborative evidence on the investment rally in the economy. Consumer goods, both the durables and non-durables segments, recorded improved performance with double-digit growth in the last two years. Performance of 17 industries at the two-digit level during April-December 2005 underlined a fairly broad-based pattern of growth within manufacturing. Seven industries, accounting for almost 34 per cent of the total weight in IIP, grew at more than 10 per cent.

India’s relative global ranking on Human Development Index has remained at a low of 127 among 177 countries for three years in a row. In areas of education and health, there are some indications of progress, albeit slow. For example, between 1991-95 to 2001-06, life expectancy at birth is estimated to have improved from 59.7 years to 63.9 years for males and from 60.9 years to 66.9 years for females. Similarly, in education, gross enrolment ratio – the proportion of children in the 6-14 years age group actually enrolled in elementary schools – is estimated to have increased progressively from 32.1 in 1950-51 to 82.4 in 2001-02 and further to 84.9 in 2003-04.

While the results of the 61st round of the large-scale NSSO survey conducted during 2004-2005 are still awaited, the annual thin-sample surveys available for the period beyond 1999-2000 point towards a continued reduction in the incidence of poverty.


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