Highlights of Economic Survey 2007-08

Economy slows down to 8.7% in 2007-08

The deceleration of growth in 2007-08 is
generally spread across most of the sectors except
electricity, community services and the composite
category “trade, hotels, transport &
communications”.


Inflation projected at 4.4 per cent in 2007-08.


Holding 9% growth a challenge, two digit growth even greater

Inflation and infrastructure biggest growth challenges

Skill dearth causing attrition, wage hike; pushing inflation

There is need also to make free the entry of “A grade” global universities (global
grading already exists) into India. “B” and “C” grade global universities/colleges could be made subject to tighter regulation. There is a need to setup up a system of skill standardization and certification (6000 odd skills). In categories in which private (including foreign) certification and/or training institutes already exists, they should be allowed and encouraged to provide such certification and training in India. Transfer of management control of ITIs and other government training institutions through a bidding process focusing on the total value of scholarship grants to be provided to poor students should be considered. The basic commitment would be to modernize and expand the institution according to a time bound plan.

Farm growth in FY'08 seen at 2.6%, against 3.8% a year ago

Foodgrain output seen at 219.3 MT against 217.3 MT in FY'07

Public investment in agriculture has declined and this sector has not been able to attract private investment because of lower/unattractive returns.

A second green revolution, particularly in the areas which are rain-fed, may be necessary to improve the income of the persons dependent on the agriculture sector.


Acceleration in domestic investment, savings drove growth

Macroeconomic fundamentals continue to inspire confidence

Investment climate full of optimism

Industrial growth slower at 9% in first 9 months of FY'08

Costly rupee, sluggish consumer goods and infra a concern

Rupee rose by 8.9% against USD during current fiscal

Money and Credit Growth

The ratio of average M3 to GDP has increased from 44 per cent in 1990-91 to 71 per
cent in 2006-07.

The monetization of the economy as measured by the ratio of average M1 to GDP has increased from 15 per cent in 1990-91 to 21 per cent in 2006-07.

Average credit growth slowed to 26.8% in FY'07, down in '08

Forex reserves up by $91.6 bn to $290.8 bn on Feb 8, 2008
GDP projected at Rs 46,93,602 crore (mkt price) in 2007-08

Inflation reined despite higher commodity prices & surge in capital inflows

Growth deceleration spread across most sectors, barring power, community services and composite category of trade, hotels, transport and communications

Cumulative increase in non-food credit by Jan 4, 2008 was 11.8% as against 17.5% a year ago

Capital inflows rise to 7.7% of GDP in first half of FY'08 as against 5.1% in FY'07

FDI inflows reach $11.2 bn, outward investments surge to $7.3 bn in April-September

Individual investors need to take informed decisions and remain cautious.

Investors' awareness is equally important from the market stability angle as investment in equities could be based on incomplete analysis and guided by short-term
speculative gains.

They would do well to resist from commonly observed "herd mentality" and "panic" in their buying and selling operations.

India’s integration with the world economy is going up.

If services trade is included, the trade to GDP ratio is higher at 48 per cent of
GDP in 2006-07 from 29.2 per cent of GDP in 2000-01, reflecting greater degree of openness.

Exports reach $111 bn in first 9 months of FY'08; Imports grow 25.9%

Surge in capital inflows, including FDI, to continue in medium term

Complete the process of selling 5-10% equity in previously identified profit making non-navratna PSUs

Phase out control on sugar, fertiliser, drugs

Sell old oil fields to private sector

Allow a share for foreign equity in all retail trade

Raise foreign equity in insurance to 49 per cent

Allow 100 per cent FDI in greenfield private agri banks

State Electricity Regulatory Commissions should notify rational, credible, cross subsidy to make open-access viable

Unemployment incresing

1.28 The 61st Round of NSSO Survey found
that 47 million work opportunities were created
during 1999-2000 to 2004-05, at an annual average
of 9.4 million. Employment growth accelerated to
2.6 per cent during this period. The labour force,
however, grew at 2.8 per cent per year, 0.2 per
cent point faster than the workforce, resulting in
an increase in the unemployment rate to 8.3 per
cent in 2004-05 from 7.3 per cent in 1999-2000.

Increase work week to 60 hours from 48 hours and daily limit to 12 hours.

As the bureaucratic capacities to deliver these goods and services (public and quasipublic goods) in sufficient quantity and adequate quality are heavily constrained, they must shed other activities that are best done by private profit and non-profit organisations and focus on excellence in these areas.

The Planning Commission projects an increase in public sector resources for the Plan from 9.46 per cent of GDPin the Tenth Five Year Plan to 13.54 per cent in the Eleventh Five Year Plan.

Central Public Sector Enterprises (CPSEs)

There were 244 Central Public Sector Enterprises (CPSEs) under the administrative
control of various Ministries/Departments as on March 31, 2007, with a cumulative investment of Rs. 4,21,089 crore.

There were 16.14 lakh (excluding casual workers and contract labour) persons employed in 244 CPSEs;

The Board for Reconstruction of Public Sector Enterprises (BRPSE) has been established to advise the Government on revival of sick and loss-making enterprises.

The total assistance approved by the Government up to December 2007 in this regard (to support CPSEs) is Rs. 8,285 crore including Rs. 1,955 crore cash assistance and Rs. 6,330 crore non-cash assistance.


Comments

Increase work week to 60 hours from 48 hours and daily limit to 12 hours.

This need not be done. Already there is a provision for overtime working. The normal work week should be kept at 48 hours and extra hours have to be on over time.

Skill dearth causing attrition, wage hike; pushing inflation

There is need also to make free the entry of “A grade” global universities (global
grading already exists) into India. “B” and “C” grade global universities/colleges could be made subject to tighter regulation. There is a need to setup up a system of skill standardization and certification (6000 odd skills). In categories in which private (including foreign) certification and/or training institutes already exists, they should be allowed and encouraged to provide such certification and training in India. Transfer of management control of ITIs and other government training institutions through a bidding process focusing on the total value of scholarship grants to be provided to poor students should be considered. The basic commitment would be to modernize and expand the institution according to a time bound plan.

When the need is to have more skilled people and if government does not have the money to start new institutes it has to allow private sector to do it.

But the present regulating agencies like UGC and AICTE have certification and peer review procedures. They have to be strengthened. There is no need for outside certification agencies. There is a need for more vigilance and more pressure on educational institutes to provide the specified facilities. There are many instances of private colleges not providing the requisite facilities and the society and its monitoring agencies are tolerating it or encouraging it.

Private sector has to be blamed for fall in standards in educational institutes. In institutes where there are recruiting on a campus placement basis, the private sector recruiters have not tested the academic skills of students and this happended for many years. Now students believe they get jobs once they join the branded institutes and they do not put in proper academic efforts. Who is to be blamed? Private sector HR executives.

The Planning Commission projects an increase in public sector resources for the Plan from 9.46 per cent of GDP in the Tenth Five Year Plan to 13.54 per cent in the Eleventh Five Year Plan.

It is interesting to note this point. On one side, we are talking of privatization and constraints on bureaucratic capacities. On the other side we are talking increasing resources for public sector. Where are the resources going and is the public sector expanding in absolute size?

The total assistance approved by the Government up to December 2007 in this regard (to support CPSEs) is Rs. 8,285 crore including Rs. 1,955 crore cash assistance and Rs. 6,330 crore non-cash assistance.

The terminology is not right. If government is the promoter of the companies, it has to be called further investment rather than assistance.