The Indian economy exhibited clear momentum in recovery, and despite the impact of a deficient monsoon on agricultural production, GDP growth for 2009-10 has been estimated at 7.2 per cent, up from 6.7 per cent recorded in 2008-09. The recovery also has been broad based, excluding “agriculture” and ';community, social and personal services';. The Index of Industrial Production (IIP) has shown double digit growth in recent months. Lead indicators for services activities point to overall improvement since the third quarter of 2009-10. Survey data suggest pick up in capacity utilisation levels in recent quarters, which however, remain below their previous peaks.
I.1 After experiencing a distinct moderation in growth to 6.7 per cent in 2008-09, the Indian economy recovered in 2009-10 with a growth of 7.2 per cent (as per Central Statistical Organisation (CSO) advance estimates). Five of the eight sectors/subsectors of the economy recorded higher growth rates in 2009-10 (Chart I.1).
I.2 The CSO recently revised the base year of national accounts statistics from 1999-2000 to 2004-05. Apart from revising the deflator, the new series (base : 2004-05) incorporates the available results of various surveys and studies undertaken by the CSO in collaboration with other Government agencies. The coverage of the new series has been expanded in terms of new activities, besides incorporating a number of procedural changes in estimation. There are no major changes in the overall annual growth rates between the old and new series, with the exception of 2007-08. At the sectoral level, however, there are changes in the growth rates and shares in GDP.
I.3 The overall agricultural growth during 2009-10 was earlier expected to decline significantly as in the previous drought years. However, supported by good rabi prospects and a strong ‘allied sector’, decline in agricultural and allied activities GDP for the year is now expected to be much smaller at (-) 0.2 per cent as per the CSO’s advance estimates.

I.4 Quarterly growth trends during 2009-10 indicate moderation in Q3 after the strong recovery seen in Q2 (Table I.1 and Chart I.2). This moderation in growth resulted primarily from two factors: first, the adverse impact of deficient monsoon on agricultural output getting largely reflected in Q3 data. Second, the impact of high base in Q3 of 2008-09, when ‘community, social and personal services’ had exhibited higher growth reflecting disbursement of Sixth Pay Commission arrears. If the impact of these two factors is netted out, Q3 growth maintains the momentum seen in earlier quarters. The acceleration in industrial growth has been particularly strong since December 2009.
Agricultural Situation
I.5 The deficient South-West monsoon during 2009, with a short fall of 23 per cent in precipitation, resulted in drought in several states. The North-East monsoon performance during 2009 has been satisfactory, with the cumulative rainfall being 8 per cent above normal as compared to 31 per cent below normal during the corresponding period of the previous year. The delayed withdrawal of the South West monsoon, above normal North East monsoon and focused Government efforts towards improving rabi production are likely to have a positive effect on rabi output, thereby partially offsetting the losses in kharif output.
Table I.1: Growth Rates of Real GDP@ |
(Per cent) |
Sector |
2008-09* |
2009-10# |
2008-09 |
2009-10 |
Q1 |
Q2 |
Q3 |
Q1 |
Q2 |
Q3 |
|
2 |
3 |
4 |
5 |
6 |
7 |
|
9 |
1. |
Agriculture and Allied Activities |
1.6 |
-0.2 |
3.2 |
2.4 |
-1.4 |
2.4 |
0.9 |
-2.8 |
|
|
(15.7) |
(14.6) |
|
|
|
|
|
|
2. |
Industry |
3.1 |
8.8 |
5.2 |
4.9 |
1.7 |
4.2 |
9.1 |
12.8 |
|
|
(20.0) |
(20.3) |
|
|
|
|
|
|
|
2.1 Mining and Quarrying |
1.6 |
8.7 |
2.6 |
1.6 |
2.8 |
7.9 |
9.5 |
9.6 |
|
2.2 Manufacturing |
3.2 |
8.9 |
5.9 |
5.5 |
1.3 |
3.4 |
9.2 |
14.3 |
|
2.3 Electricity, Gas & Water Supply |
3.9 |
8.2 |
3.3 |
4.3 |
4.0 |
6.2 |
7.4 |
4.9 |
3. |
Services |
9.3 |
8.5 |
9.4 |
9.4 |
10.3 |
7.7 |
8.9 |
6.6 |
|
|
(64.4) |
(65.1) |
|
|
|
|
|
|
|
3.1 Trade, Hotels, Restaurants, Transport, Storage and Communication |
7.6 |
8.3 |
10.8 |
10.0 |
4.4 |
8.1 |
8.5 |
10.0 |
|
3.2 Financing, Insurance, Real Estate and Business Services |
10.1 |
9.9 |
9.1 |
8.5 |
10.2 |
8.1 |
7.7 |
7.8 |
|
3.3 Community, Social and Personal services |
13.9 |
8.2 |
8.7 |
10.4 |
28.7 |
6.8 |
12.7 |
-2.2 |
|
3.4 Construction |
5.9 |
6.5 |
7.1 |
8.0 |
3.0 |
7.1 |
6.5 |
8.7 |
4. |
Real GDP at Factor Cost |
6.7 |
7.2 |
7.6 |
7.5 |
6.2 |
6.1 |
7.9 |
6.0 |
|
|
(100) |
(100) |
|
|
|
|
|
|
Memo: |
|
(Amount in Rupees crore) |
a. |
Real GDP at Factor Cost (Base: 2004-05) |
41,54,973 |
44,53,064 |
|
b. |
GDP at current market prices |
55,74,449 |
61,64,178 |
|
@ : At 2004-05 Prices. * : Quick Estimates. # : Advance Estimates.
Note: Figures in paranthesis indicate shares in real GDP.
Source: Central Statistical Organisation. |

I.6 Encouraged by the record foodgrains production of 234.5 million tonnes during 2008-09, the Ministry of Agriculture had set a higher target of foodgrains production in 2009-10 (Table I.2). As per the Second Advance Estimates for 2009-10, total foodgrains production is estimated to decline by 7.5 per cent over the previous year. While kharif foodgrains and oilseeds production is expected to decline by 14.6 per cent, rabi production is xpected to exhibit a marginal increase of 0.7 per cent. Crop-wise, a decline is expected for all crops except tur, gram, rapeseed and mustard, soyabean, cotton and jute.
Food Management
I.7 Notwithstanding the decline in production, procurement of foodgrains (rice and wheat) during 2009-10 (up to March 15, 2010) was higher than in the previous year (Table I.3). The total stock of foodgrains declined from the peak of 54.8 million tonnes as on June 1, 2009 to 45.8
million tonnes as on March 1, 2010 due to higher off-take. Even after the decline, both rice and wheat stocks have remained substantially higher than their respective buffer norms.
Table I.2: Agricultural Production |
(Million tonnes) |
Crop |
2007-08 |
2008-09 |
2009-10 |
Target |
Achieve-ment@ |
1 |
2 |
3 |
4 |
5 |
Rice |
96.7 |
99.2 |
100.5 |
87.6 |
Kharif |
82.7 |
84.9 |
86.0 |
72.9 |
Rabi |
14.0 |
14.3 |
14.5 |
14.7 |
Wheat |
78.6 |
80.7 |
79.0 |
80.3 |
Coarse Cereals |
40.8 |
40.0 |
43.1 |
34.3 |
Kharif |
31.9 |
28.5 |
32.7 |
22.8 |
Rabi |
8.9 |
11.5 |
10.5 |
11.5 |
Pulses |
14.8 |
14.6 |
16.5 |
14.7 |
Kharif |
6.4 |
4.7 |
6.5 |
4.2 |
Rabi |
8.4 |
9.9 |
10.0 |
10.5 |
Total Foodgrains |
230.8 |
234.5 |
239.1 |
216.9 |
Kharif |
121.0 |
118.1 |
125.2 |
99.9 |
Rabi |
109.8 |
116.3 |
114.0 |
117.0 |
Total Oilseeds |
29.8 |
27.7 |
31.6 |
26.3 |
Kharif |
20.7 |
17.8 |
19.4 |
16.2 |
Rabi |
9.0 |
9.9 |
12.2 |
10.1 |
Sugarcane |
348.2 |
285.0 |
340.0 |
251.3 |
Cotton # |
25.9 |
22.3 |
26.0 |
22.3 |
Jute and Mesta ## |
11.2 |
10.4 |
11.2 |
10.4 |
@ : Second advance estimate for 2009-10.
# : Million bales of 170 kgs. each.
## : Million bales of 180 kgs. each.
Source : Ministry of Agriculture, Government of India. |
Table I.3: Management of Food Stocks |
(Million tonnes) |
Month /Year |
Opening Stock of Foodgrain |
Procurement of Foodgrain |
Foodgrain Off-take |
Norms |
Rice |
Wheat |
Total |
Rice |
Wheat |
Total |
PDS |
OWS |
OMS – Domestic |
Exports |
Total |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 |
11 |
12 |
13 |
2008-09 |
13.8 |
5.8 |
19.8 |
32.8 |
22.7 |
55.5 |
34.9 |
3.4 |
1.2 |
0.0 |
39.5 |
|
2008-09@ |
13.8 |
5.8 |
19.8 |
31.2 |
22.7 |
53.9 |
23.0 |
2.0 |
0.1 |
0.0 |
25.1 |
|
2009-10@ |
21.6 |
13.4 |
35.6 |
31.3 |
25.4 |
56.7 |
28.8 |
2.5 |
0.2 |
0.0 |
31.4 |
|
Memo |
|
|
|
|
|
|
|
|
|
|
|
|
January 2010 |
24.4 |
23.1 |
47.7 |
4.4 |
0.0 |
4.4 |
– |
– |
– |
– |
– |
20.0 |
February 2010 |
25.7 |
20.6 |
46.5 |
3.3 |
0.0 |
3.3 |
– |
– |
– |
– |
– |
|
March 2010 |
27.0 |
18.4 |
45.8 |
1.1 |
0.0 |
1.1 |
– |
– |
– |
– |
– |
|
April 2010* |
– |
– |
– |
0.4 |
4.4 |
4.8 |
– |
– |
– |
– |
– |
16.2 |
PDS: Public Distribution System. OWS: Other Welfare Schemes. OMS : Open Market Sales.
– : Not Available. @ : Procurement up to March 15, off-take upto November 30. * : Procurement up to April 12.
Note : Closing stock figures may differ from those arrived at by adding the opening stocks and procurement and deducting off-take, as stocks include coarse grains also.
Source: Ministry of Consumer Affairs, Food and Public Distribution, Government of India. |
I.8 While off-take during the first half
of 2009-10 was mainly through the targeted
public distribution system (TPDS) and
other welfare schemes, in the second half
of the year, the Government allocated 3
million tonnes of wheat and 1 million tonne
of rice for open market sale with a view to
containing rising prices of food articles.
Additional ad hoc allocations of 1.1 million
tonnes of rice and 2.5 million tonnes of
wheat were made under TPDS for the
period January-February 2010 to augment
supply of these items.
Industrial Performance
I.9 Industrial output, which was
affected by the cyclical slowdown and international commodity price shocks in
2007-08 and the global recession in 2008-
09, recovered substantially in 2009-10. The
Index of Industrial Production (IIP)
registered double digit growth during
October 2009-February 2010 (Chart I.3 and
Table I.4a). The industrial growth was
driven by the manufacturing sector, with a
weighted contribution of 88.8 per cent,
higher than its weight of 79.4 per cent in
the IIP.
I.10 Thirteen out of seventeen industries
in the IIP, accounting for 59.9 per cent of
the weight, recorded higher growth than in
the previous year. The top five
manufacturing industries with a combined
weight of 36.1 per cent in the IIP
contributed about 80.7 per cent of the
growth during April-February 2009-10, as
compared with 122.2 per cent contribution
in the corresponding period in 2008-09 and
34 per cent in 2007-08. This suggests that
though the recovery has become more
broad-based as compared to the last year, there is scope for further improvement
(Chart I.4b).

I.11 The use-based classification of
industries shows that capital goods since
September 2009 and intermediate goods
since August 2009 have registered doubledigit
growth, which will support the growth
momentum in several downstream
industries. Durables production, which had
remained on the double-digit growth trajectory since the beginning of 2009-10,
accelerated further between November
2009 and February 2010. The growth in
basic goods remained relatively moderate
during 2009-10, with intermittent spikes.
Industry segments like ‘transport
equipment and parts’, ‘machinery and
equipment other than transport equipment’
and ‘metal products and parts, except
machinery and equipment’ recorded growth rates in the range of 36-59 per cent during
December 2009-February 2010. The surge
in growth of ‘transport, equipment and
parts’ during the last few months is also
corroborated by the robust performance
seen in automobiles production. Overall
automobiles production grew by almost 24
per cent during April-February 2009-10 and
the share of exports in total production was
about 13 per cent1. The consumer nondurables
segment, remained subdued,
notwithstanding some improvement in
February 2010. The relative weakness in
this segment could be attributed to output
contraction in food products, beverages and
tobacco products and jute and other
vegetable fibre textiles (except cotton).
Given its substantial weight in the overall
consumer goods output, the weak
performance of the consumer non-durable
segment has dampened recovery in this subsector.
Table I.4: Index of Industrial Production: Sectoral and
Use-Based Classification of Industries |
(Per cent) |
Industry Group |
Weight in the IIP |
Growth Rate |
Weighted Contribution # |
April-March 2008-09 |
April-Feb |
April-March 2008-09 |
April-Feb |
2008-09 |
2009-10 P |
2008-09 |
2009-10 P |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Sectoral |
|
|
|
|
|
|
|
Mining |
10.5 |
2.6 |
2.6 |
9.7 |
6.3 |
5.9 |
6.4 |
Manufacturing |
79.4 |
2.7 |
3.1 |
10.5 |
85.3 |
87.2 |
88.8 |
Electricity |
10.2 |
2.8 |
2.4 |
5.8 |
8.3 |
6.7 |
4.8 |
Use-Based |
|
|
|
|
|
|
|
Basic Goods |
35.6 |
2.6 |
2.7 |
6.7 |
28.4 |
26.7 |
19.8 |
Capital Goods |
9.3 |
7.3 |
9.2 |
18.2 |
34.1 |
38.2 |
23.8 |
Intermediate Goods |
26.5 |
-1.9 |
-2.3 |
13.7 |
-18.4 |
-20.2 |
34.0 |
Consumer Goods (a+b) |
28.7 |
4.7 |
5.1 |
7.1 |
54.2 |
53.4 |
22.5 |
a) Consumer Durables |
5.4 |
4.5 |
4.1 |
25.5 |
12.4 |
10.4 |
19.4 |
b) Consumer Non-durables |
23.3 |
4.8 |
5.4 |
1.3 |
41.7 |
43.0 |
3.1 |
General |
100.0 |
2.7 |
3.0 |
10.1 |
100.0 |
100.0 |
100.0 |
P : Provisional.
# : Figures may not add up to 100 due to rounding off.
Source : Central Statistical Organisation. |

I.12 During the period April-January
2009-10, capacity utilisation in infrastructure
sector showed a mixed trend, with finished steel and fertilizer sectors recording higher
utilisation as compared with the
corresponding period last year, while
cement and refinery production of
petroleum products witnessed lesser
utlisation for the same period (Table I.5).
I.13 The Order Book, Inventory and
Capacity Utilisation Survey of the Reserve
Bank indicates that even though capacity
utilisation has been witnessing an
improvement since Q2 of 2009-10 it remains below the peak observed during the
pre-global crisis period. Similar pattern is
also observed from the Industrial Outlook
Survey of the Reserve Bank (Chart I.5).
Table I.5: Capacity Utilisation in Infrastructure Sector |
(Per cent) |
Sector |
2008-09 (April-January) |
2009-10 (April-January) |
1 |
2 |
3 |
Finished Steel (SAIL+VSP+ Tata Steel) |
86.3 |
89.8 |
Cement |
85.0 |
83.0 |
Fertilizer |
84.8 |
95.6 |
Petroleum-Refinery Production |
107.3 |
106.7 |
Source: Capsule Report on Infrastructure Sector Performance (April 2009-Janaury 2010), Ministry of Statistics and Programme Implementation, GoI. |
Infrastructure
I.14 The performance of core
infrastructure after improving significantly
during November 2009 to January 2010,
decelerated in February 2010 (Charts I.6a).
The slowdown in the growth of core
infrastructure during February 2010 (4.5 per cent as compared to 9.4 per cent in January
2010) is led by cement and steel, which may
be attributed partly to adjustment in
inventories. The accelerated growth in
power was led by the robust manufacturing
sector performance, while the growth in the
output of cement and steel until February
2010 has been on account of improved
construction activity. The output of crude
and petroleum products remained generally
subdued during the year so far (Chart I.6b).
The petroleum products picked up somewhat since August 2009, while crude oil
production has recovered since December
2009. Natural gas production, which is not
represented in the core infrastructure index,
increased sharply during 2009-10 on account
of commencement of production from the
D6 block in Krishna-Godavari (KG) basin
and Rajasthan fields (Cairn). Natural gas
production grew by about 40 per cent in
April-January 2009-10 with high growth
recorded particularly during the last few
months (an average of 61 per cent during
November 2009- January 2010).

Services Sector
I.15 The growth of services sector,
after exhibiting significant recovery in
the second quarter, decelerated to 6.6 per
cent in Q3 of 2009-10 (Chart I.7). The
decline in the growth of ‘community,
social & personal services’ depressed the
pace of growth during Q3 of 2009-10.
Growth in the output of the sub-groups
viz., ‘construction’ and ‘trade, hotel,
transports & communication’, however,
accelerated.
I.16 The lead indicators for services
sector activity suggest an overall
improvement, particularly since Q3 in
relation to the performance in the first half
of 2009-10. The services dependent on
external demand such as tourist arrivals,
cargo handled by seaports and airports,
and passengers handled by international
terminals recovered significantly during
Q3 of 2009-10, reflecting the improving
external environment. Services driven by
domestic demand also displayed robust
performance in Q3 of 2009-10, particularly
those having strong linkages with the
manufacturing sector. Commercial vehicle
production, a lead indicator for transport
services, grew significantly during Q3 of
2009-10 (Table I.6).
I.17 To sum up, GDP growth in 2009-10
has been higher than in the previous
year, despite the adverse impact of the
deficient South West monsoon on
agricultural output. Going forward, the
short-term favourable impact of certain
fiscal stimulus measures on growth will
be absent, which has to be compensated by durable growth in private demand to
sustain recovery. Industrial growth has
already shown sustained acceleration,
and better prospects for rabi crops would also add momentum to the overall
recovery. The lead indicators of services
activities point to firmer recovery in this
sector.

Table I.6: Indicators of Services Sector Activity |
(Growth in Per cent) |
|
2007-08 |
2008-09 |
2009-10 |
April-February |
Q1 |
Q2 |
Q3 |
Q4 |
2008-09 |
2009-10 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Tourist arrivals * |
12.2 |
-3.3 |
-1.7 |
-4.0 |
6.5 |
13.2 |
-3.3 |
3.5 |
Commercial vehicles production |
4.8 |
-24.0 |
-18.5 |
5.2 |
127.3 |
152.6 |
-23.4 |
58.9 |
Cement ## |
8.1 |
7.2 |
12.1 |
12.6 |
8.5 |
9.7 |
6.9 |
10.6 |
Steel ## |
6.2 |
1.6 |
1.7 |
1.7 |
7.8 |
8.6 |
1.9 |
4.5 |
Railway revenue earning freight traffic |
9.0 |
4.9 |
5.1 |
8.0 |
10.4 |
3.4 |
5.0 |
8.8 |
Cell phone connections# |
38.3 |
44.8 |
59.4 |
52.4 |
69.1 |
29.2 |
73.7 |
51.4 |
Cargo handled at major ports# |
12.0 |
2.1 |
2.1 |
3.0 |
10.7 |
13.2 |
3.0 |
6.0 |
Civil aviation |
|
|
|
|
|
|
|
|
Export cargo handled# |
7.5 |
3.4 |
0.5 |
1.9 |
21.0 |
17.4 |
5.0 |
8.2 |
Import cargo handled# |
19.7 |
-5.7 |
-12.7 |
-4.9 |
18.9 |
49.7 |
-3.5 |
2.8 |
Passengers handled at international terminals# |
11.9 |
3.8 |
0.1 |
3.7 |
7.6 |
9.8 |
5.3 |
4.5 |
Passengers handled at domestic terminals# |
20.6 |
-12.1 |
-6.5 |
22.2 |
30.7 |
20.6 |
-12.0 |
14.3 |
* : Data pertain to full years.
# : Data up to January 2010.
## : Leading Indicator for construction and up to February.
Source: Ministry of Tourism; Ministry of Commerce and Industry; Ministry of Statistics and Programme Implementation and Reserve Bank of India. |
1 Source: Society for Indian Automobile Manufacturers (SIAM). |