Highlights of Economic Survey: Economy growth at 8.1 per cent
New Delhi: The 2005-06 pre-budget Economic Survey tabled in Parliament has provided a word of caution saying that the economy's rosy outlook was not devoid of risks of inflation, hardening interest rate and fiscal deficit. The Survey has prescribed hastening tax and labour reforms and measures to remove infrastructure bottlenecks to sustain high growth.

The Survey said the Indian industry needed to be unburdened from high level of taxes and distortive exemptions that provided perverse incentives. It favoured levying user charges and cutting unwanted subsidies.

Simplification and digitisation of tax administration remains a pre-requisite for a transparent and hassle free tax system, the Survey said.

The Survey projected economic growth of 8.1 per cent during 2005-06 with new industrial resurgence, pick up in investment and modest inflation.
Back to News Review index page  

Automobile export potential remains untapped
New Delhi: Though the Indian automobile industry is likely to attract a massive investment of Rs80,000 crore by next year, its export potential still remains untapped despite it gaining global recognition, the Economic Survey said on Monday.

"While a beginning has been made in the export of vehicles, the potential in this area is far from fully tapped," the Survey tabled by Finance Minister P Chidambaram in Parliament today said.

The Survey made a case for higher foreign shipments even as the automobile exports as a proportion of total production have increased to 8.9 per cent in 2005-06 from
2.9 per cent in 1999-2000.
Back to News Review index page  

Decline in poverty rate study may be incorrect
New Delhi: The Economic Survey said it was too early to tell whether decline in poverty met the targets set in the 10th Plan and said it doubted the findings of an official study about decline in poverty rate as there was some controversy over the methodology.

The comparability and the extent of actual decline were matters of some controversy due to a change in the methodology for data collection in 1999-2000 the Survey said.
There has been intense debate among academicians regarding the extent of actual incidence in people below poverty line between 1993-99 and 1999-2000.
Back to News Review index page  

Agri sector growth forecast at 2.3 per cent
New Delhi: The Economic Survey predicted a 2.3 per cent farm sector growth for 2005-06. The Survey advocated the development of alternative markets by shifting from the expensive public procurement and distribution system for better returns to farmers.

The Survey said that with good Kharif and bright Rabi prospects, foodgrain production is expected to increase by five million tonne in 2005-06 to 209 million tonne. It also called for improving bank credit conditions for higher profits, better marketing and thrust on futures trading.

The Survey said a shift from the current MSP and public procurement system and developing alternative product markets are essential for crop diversification and broad-based agricultural development.

It said Indian agriculture suffers from low yields per hectare, volatility in production and wide disparities of productivity over regions and crops.

The emerging areas like horticulture, floriculture, organic culture, genetic engineering, food processing, branding and packaging and futures trading have high potential for growth, it said.

During 2005-06, the credit flow to the priority sector was primarily driven by agriculture and allied sectors, the survey said.

It said loans to agriculture has more than doubled in last three years from Rs60,761 crore in March 2002 to Rs1,22,370 crore at end of March 2005. It stood at
Rs1 41,612 crore in end October 2005.
Back to News Review index page  

Labour reforms critical for growth
New Delhi: The Economic Survey has underlined the need for labour law reforms to enhance productivity and competitiveness of the Indian industry.

"The importance of reforming the labour laws to enhance productivity, competitiveness, employment generation and general economic reforms hardly needs emphasis," the Survey tabled by Finance Minister P Chidambaram in Parliament said.

The Survey noted that the number of strikes and lockouts in January-September 2005 period stood at 340, which came to more than one strike per day. It said West Bengal experienced maximum instances of industrial unrest followed by Tamil Nadu and Gujarat.
Back to News Review index page  

Fuel cost ought to be passed on to users
New Delhi: The pre-Budget Economic Survey has warned that the current practice of not passing on cost of production to consumers will have serious consequences and it said non-resolution of subsidies in cooking gas and kerosene was 'floundering' reforms in the sector.

"With medium-term prospects of crude prices remaining high, the continuance of incomplete pass-throughs is not sustainable without serious consequences to the financial health of oil companies and the exchequer," the Survey warned and said management of the crisis needed bold response.

Despite hiking petrol price by Rs5.50 a litre and diesel by Rs4 per litre in two installments in 2005-06, oil firms continue to sell the two auto fuels below the cost price. Oil firms are losing Rs171 on sale of every cylinder of domestic LPG and Rs12.96 on sale of every litre of kerosene through PDS.
Back to News Review index page  

Telephone penetration can improve
New Delhi: The Economic Survey complimented the government and telecom players for a five-fold increase in phone penetration in the last six years along with a significant cut in tariffs, but it also called for further intensifying the efforts, saying the present growth was not enough to match the vast potential.

Listing out development in the sector, including a teledensity of 11.32 per cent, up from 2.32 per cent in 1999, the Survey said that though the government has adopted a "technology neutral" policy, the scarce Spectrum needed to be allocated efficiently to maximise its economic value.

"Although India's 125 million strong telephone network including mobile phones is one of the largest in the world, the telephone penetration rate continues to be low at about 11.32 per cent per hundred people. The country offers vast avenues for growth," stated the Survey, tabled in Parliament in the run-up to Budget 2006-07.
Back to News Review index page  

Social indicator rankings a cause for concern
New Delhi: The Economic Survey said despite higher economic growth and income levels India has slipped three places to 127 in the social indicator ranking of 177 nations, which is a cause for concern, it said.

Pointing that India slipped three positions in three years from 124 in 2000 and was way behind China, Sri lanka and Indonesia, it said the country's overall performance on human development has been mixed in the last decade with much slower improvements in health indicators like life expectancy and infant mortality, the Economic Survey said.
Back to News Review index page  

Bring down subsidy in postal services
New Delhi: The Economic Survey has expressed worry over the increasing subsidy in postal services, expected to be about Rs1,450 crore in 2006. It has asked the government to clarify the rationale and mechanism for the ballooning subsidy.

"There is a significant subsidy element in postal service with user charges in the system roughly covering only 76 per cent of the cash costs. As per the latest indications, the deficit is likely to increase from Rs1,364.40 crore in 2002-03 to Rs1,449.64 crore in 2005-06 (Budget Estimate).

"Clarifying the rationale, the mechanism and the size of the subsidy constitutes an important policy question at this juncture", the Survey, tabled in Parliament today, pointed.

In order to meet the rising expectations of the customers, the Survey called for improving the ambience of postal finance services, which includes small savings, by bringing them under one roof of a Financial Super Market.

The Post Office Savings Bank is already the largest savings bank in India in terms of network, accounts and annual deposits.

The exclusive retailing outlets — Postal Finance Marts— are to be manned by Association of Mutual Fund Institutions (AMFI) and insurance qualified staff.

These Marts with networked and computerised facilities will provde postal financial products like Savings Bank and Savings Certificates, Postal Life Insurance and non-life insurance products, global money transfer, mutual funds and Government Securities.

The Senior Citizens Savings Scheme, a special high- yielding assured return scheme mobilised Rs8,775 crore in 2004-05, and India Post provided options to senior citizens for payment of interest through various means like cash, payment into POSB accounts and money order.

The postal department is enhancing usage of IT, with Automated Mail Processing Centres (AMPC) having already been set up at Mumbai and Chennai for faster processing of mails, mainly business mails.
Back to News Review index page  

Power sector could cause a Rs300,000 crore loss to GDP
New Delhi: The Economic Survey has estimated a 12 per cent peak power shortage in the current fiscal and said this could mean a loss of a whopping Rs3,00,000 crore to the economy. It has also sought quick remedies — faster reforms, adequate fuel supply and suitable policy packages.

With peaking shortage of 12 per cent and average shortage of 8 per cent, the country lost 50 billion units or a massive Rs15,000 crore in foregone generation alone during the current financial year, said the Survey for 2005-06.

Power scenario in the country continues to be a matter of concern," the survey said, adding that inadequate power availability adversely affects in a major way output of large industries, irrigation and production of small and medium enterprises.

Electricity generation during April-December 2005-06 grew by 4.7 per cent to 458.6 billion units. This was not only less than the annual target of 5.8 per cent but also lower than the 6.5 per cent growth achieved in the same period last fiscal.

The slowdown in generation was partly on account of coal and gas supply crunch, which resulted in a growth of only 1.4 per cent in thermal power generation.
The Survey projected a dismal picture of state power sector's financial performance, as resources foregone through high losses and poor returns continued to be very large.

The total commercial losses of state utilities are estimated at a huge Rs22,569 crore with a negative rate of return of 26.13 per cent in 2005-06. This is, however, less than the losses of Rs23,558 crore and a rate of return of a negative 31.94 per cent last fiscal.
Back to News Review index page  

Core sector growth down by 1.9 per cent
New Delhi: The Economic Survey said India's roads, airport and port sectors require a whopping Rs2,60,000 crore investment in the next six years, and the government should frame conducive policies for the infrastructure sector, whose growth dipped to 4.5 per cent from 6.4 per cent last year, the Economic Survey said.

Saying that India's growth prospects are intricately intertwined with the rapid development of physical infrastructure, the Economic Survey 2005-06 suggested that speedy provision of quality infrastructure through appropriate policy stimulus constitutes the first and foremost component of this challenge.

The Prime Minister's Committee on infrastructure has estimated that the nation would require investment to the tune of Rs2, 62,000 crore by 2012. Of the total amount, investment in national highways was envisaged to be Rs1,72,000 crores, Rs40,000 crores for airports and Rs50,000 crores for development of ports.
Back to News Review index page  

Development of roads requires huge investment
New Delhi: The Economic Survey has identified the need for a Rs1, 72,000 crore investment in national highways. It has asked the government to gear up policies and institutions to meet specific requirements while increasing the outlay for road sector.

It said the policies and institutions need to be geared up to meet the specific requirements of the infrastructure sectors in India.

The Survey said the completion of substantial portions of the Golden Quadrilateral, envisaging four/six laning of highways connecting Delhi, Mumbai, Chennai and Kolkata, was fuelling demand and facilitating the growth of productivity in the country.

"The model concession agreement, which has been finalised for the roads sector, is expected to give a further impetus to the timely completion of the road projects," it said.

Stating the port connectivity was still the soft underbelly of the port sector, the Survey said the current efforts to bolster it would improve freight movement in the medium term.
Back to News Review index page  

State PSUs losses should be cut: Survey
New Delhi: The Economic Survey has asked states to impose proper user charges, cut losses of state PSUs, bring down interest and pension bills to reduce deficits further.

Patting states for cutting the combined fiscal deficit sharply to 3.1 per cent in 2005-06 from four per cent in 2004-05, the Survey said: "With the 12th Finance Commission's (TFC) debt consolidation and write-off scheme in place, the position might improve further."

While most of the indicators of state finances show a "somewhat improved picture", the survey presented to Parliament outlined the need to address the causative factors that was deteriorating their fiscal situation including the growing interest and pension burden, losses of state PSUs, absence of proper user charges and lack of buoyancy in taxes.
Back to News Review index page  

SC tells Central government to form committee on soft drinks contents
New Delhi: The Supreme Court has told the Centre to constitute an expert committee to find out whether there were any harmful chemical contents in soft drinks. It said the committee would go into the broader issue and not restrict to determining the pesticide content in soft drinks. The Court has granted three weeks time for setting up the committee. The PIL alleged that soft drinks contained certain chemical ingredients like phosphoric acid, which were harmful.
Back to News Review index page  

IT industry wants trade pact with US
Mumbai: The Indian IT industry wants some positive initiatives towards inking a free trade agreement with the US in the services sector during President George W Bush's visit to the country. The IT sectors hopes are soaring that the US administration would also raise the visa limit for the entry of Indian tech professionals in the world's largest economy.

The US is the biggest market for India's software services and business process outsourcing firms, accounting for nearly 70 percent of the total exports that are likely to touch a staggering $24 billion in the year ending March 31.
Back to News Review index page