The Indian economy, which had exhibited a sharp recovery in the second half of 2009-10,
witnessed further consolidation of growth in the first quarter of 2010-11. With a normal
monsoon, lead data on the kharif sowing and production estimates suggest an above
trend rate of growth in the agriculture sector in 2010-11. Industrial growth remains robust,
albeit, with greater volatility. Lead indicators of services activities point to a continuation
of the momentum. Going forward, while the growth rates in the services sector and
agriculture are likely to remain elevated, sustainability of the recent buoyancy in the
industrial sector would require alleviation of supply constraints, particularly in the
infrastructure sector and sustained momentum in private demand.
I.1 As per the estimates released by the
CSO, real GDP growth was placed at 8.8 per
cent during the first quarter of 2010-11, which
is the highest quarterly growth recorded so
far since the third quarter of 2007-08.
Although part of the increase in growth
during the first quarter of 2010-11 is due to
a favourable base effect, it largely reflects
consolidation of the recovery. Real GDP
growth was broad based, with robust
performance in all the major sectors
(Table I.1). Agriculture and allied activities
witnessed a strong pick-up over the previous four quarters, led by higher growth in allied
activities. The growth in the industrial sector,
though lower than in the previous two
quarters, continued to be in double digits,
primarily reflecting robust capital goods and
consumer durables production. The services
sector growth gathered further momentum
during the first quarter of 2010-11.
Table I.1: Sectoral Growth Rates of GDP (2004-05 prices) |
(Per cent) |
Item |
2008-09 * |
2009-10 # |
2009-10 |
2010-11
Q1 |
Q1 |
Q2 |
Q3 |
Q4 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
1. Agriculture & allied activities |
1.6 |
0.2 |
1.9 |
0.9 |
-1.8 |
0.7 |
2.8 |
2. Industry |
3.1 |
10.4 |
4.6 |
9.0 |
12.3 |
15.1 |
11.4 |
2.1 Mining & quarrying |
1.6 |
10.6 |
8.2 |
10.1 |
9.6 |
14.0 |
8.9 |
2.2 Manufacturing |
3.2 |
10.8 |
3.8 |
9.1 |
13.8 |
16.3 |
12.4 |
2.3 Electricity, gas & water supply |
3.9 |
6.5 |
6.6 |
7.7 |
4.7 |
7.1 |
6.6 |
3. Services |
9.3 |
8.3 |
7.5 |
10.0 |
7.3 |
8.5 |
9.4 |
3.1 Trade, hotels, restaurants, transport,
storage & communication, etc. |
7.6 |
9.3 |
5.5 |
8.5 |
10.2 |
12.4 |
12.2 |
3.2 Financing, insurance, real
estate & business services |
10.1 |
9.7 |
11.8 |
11.5 |
7.9 |
7.9 |
8.0 |
3.3 Community, social & personal services |
13.9 |
5.6 |
7.6 |
14.0 |
0.8 |
1.6 |
6.7 |
3.4 Construction |
5.9 |
6.5 |
4.6 |
4.7 |
8.1 |
8.7 |
7.5 |
4. GDP at factor cost |
6.7 |
7.4 |
6.0 |
8.6 |
6.5 |
8.6 |
8.8 |
* : Quick Estimates. # : Revised Estimates.
Source: Central Statistics Office. |
Agricultural Situation
I.2 The cumulative actual area
weighted rainfall during the South-West
monsoon season (June to September 30, 2010) was 2 per cent above Long Period
Average (LPA), as against 22 per cent below
LPA during the previous year. Of the 36
meteorological subdivisions, the cumulative
rainfall was excess/normal in 31 subdivisions
(13 sub-divisions last year). The
rainfall, however, was deficient in North-
East India (Chart I.1). As on October 21,
2010, the total live water storage in 81 major
reservoirs of the country was 74 per cent of
the Full Reservoir Level (64 per cent during
the corresponding period last year).
I.3 Following a normal monsoon, the
area sown during kharif 2010-11 (as on
October 22) turned out to be higher than in
the corresponding period of the previous
year for all crop categories, except soyabean
and sesamum (Table I.2). The increase in
area coverage during 2010-11 kharif season
relative to 2008-09, however, turns out to
be marginal. Since 2009-10 had witnessed a
significant deficiency in rainfall, a
comparison of 2010-11 performance with
2008-09 provides a better picture of growth
in the agriculture sector. Acreage under
pulses, cotton, sugarcane and soyabean
during kharif 2010-11, has been more than
the normal area sown.
|
I.4 The increase in total area sown is
manifested in the First Advance Estimates
of kharif production, which show increase
in production across all crops, barring jute,
sesamum and soyabean. The total kharif
foodgrains production during 2010-11 is
estimated to increase by 10.4 per cent over
the previous year. The increase, however, is
on a lower base of last year, which happened
to be a drought year. The estimated kharif
foodgrains production during 2010-11 (114.6
million tonnes), still remains lower than the
level attained in 2007-08 (120.9 million
tonnes) and 2008-09 (118.1 million tonnes).
I.5 Owing to drought in some States,
particularly Jharkhand, Bihar and West
Bengal, kharif rice production during
2010-11, though estimated higher than the
preceding year, would fall short of the record
level achieved in 2008-09. Floods in Punjab
and Haryana and delayed replanting of
paddy could also have affected the rice
productivity. Total cereals production,
hence, may lag behind the levels attained
in 2007-08 and 2008-09. Notwithstanding
the likely increase in kharif production, the
demand supply gap in the case of oilseeds
and pulses is likely to remain. Among commercial crops, only cotton has posted an
all-time high production. This has not helped
in moderating domestic prices since
international cotton prices have spiked after
floods in Pakistan, which is a major producer
and exporter of cotton.
I.6 The demand supply gap in the case
of important food items like fruits and
vegetables and protein based products
continue to persist due to near stagnant
supply, owing to lower yields and increase
in demand due to factors like increase in
population and income levels and changing
food habits of the people. This exerts
pressure on the prices. Moreover, increase in input costs has also led to spurt in prices
in the case of protein items like milk, eggs
and meat.
Table I.2: Area Sown and Production under Kharif Crops |
(Area in lakh hectares and production in million tonnes) |
Crop |
Sowing |
Production |
Normal |
2008-09 |
2009-10 |
2010-11* |
2007-08 |
2008-09 |
2009-10$ |
2010-11@ |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Rice |
395.10 |
386.18 |
332.87 |
355.12 |
82.66 |
84.91 |
75.91 |
80.41 |
|
|
|
(-13.8) |
(6.7) |
|
(2.7) |
(-10.6) |
(5.9) |
Total coarse cereals |
222.23 |
199.85 |
206.16 |
212.16 |
31.89 |
28.54 |
23.63 |
28.23 |
|
|
|
(3.2) |
(2.9) |
|
(-10.5) |
(-17.2) |
(19.5) |
Total cereals |
617.33 |
586.03 |
539.03 |
567.28 |
114.55 |
113.45 |
99.54 |
108.64 |
Total pulses |
107.94 |
104.78 |
104.97 |
125.32 |
6.40 |
4.69 |
4.30 |
6.00 |
of which |
|
|
(0.2) |
(19.4) |
|
(-26.8) |
(-8.2) |
(39.5) |
Tur |
35.53 |
34.58 |
36.48 |
44.86 |
3.08 |
2.27 |
2.55 |
3.27 |
Urad |
22.82 |
21.97 |
22.92 |
25.54 |
1.12 |
0.84 |
0.85 |
1.08 |
Moong |
26.14 |
24.12 |
24.79 |
29.80 |
1.25 |
0.78 |
0.44 |
0.88 |
Total foodgrains |
725.27 |
690.81 |
644.00 |
692.60 |
120.95 |
118.14 |
103.84 |
114.63 |
|
|
|
(-6.8) |
(7.5) |
|
(-2.3) |
(-12.1) |
(10.4) |
Total nine oilseeds |
175.72 |
184.02 |
174.43 |
175.49 |
20.71 |
17.81 |
15.66 |
17.27 |
of which |
|
|
(-5.2) |
(0.6) |
|
(-14.0) |
(-12.0) |
(10.3) |
Groundnut |
53.81 |
52.87 |
44.65 |
49.84 |
7.36 |
5.62 |
3.66 |
5.64 |
Sesamum |
17.76 |
15.55 |
17.62 |
17.06 |
0.76 |
0.64 |
0.66 |
0.62 |
Soyabean |
84.00 |
96.42 |
95.82 |
93.35 |
10.97 |
9.91 |
10.05 |
9.81 |
Cotton # |
90.86 |
90.92 |
100.09 |
108.47 |
25.88 |
22.28 |
23.94 |
33.50 |
|
|
|
(10.1) |
(8.4) |
|
(-13.9) |
(7.4) |
(40.0) |
Jute # # |
7.85 |
7.37 |
6.92 |
7.59 |
10.22 |
9.63 |
10.70 |
9.69 |
|
|
|
(-6.1) |
(9.7) |
|
(-5.7) |
(11.1) |
(-9.5) |
Sugarcane |
44.97 |
44.15 |
42.02 |
50.60 |
348.19 |
285.03 |
277.75 |
324.91 |
|
|
|
(-4.8) |
(20.4) |
|
(-18.1) |
(-2.6) |
(17.0) |
All Crops |
1044.67 |
1017.27 |
967.46 |
1034.75 |
|
|
|
|
|
|
|
(-4.9) |
(7.0) |
|
|
|
|
* : As on October 22, 2010. $ : Fourth Advance Estimates. @ : First Advance Estimates.
# : Million bales of 170 kgs. each. ## : Million bales of 180 kgs. each.
Note: Figures in parentheses are percentage change over previous year.
Source: Ministry of Agriculture, Government of India. |
Food Management
I.7 The procurement of foodgrains (rice
and wheat) during 2010-11 (up to October
23) was lower than that in the corresponding
period of the previous year. Average monthly
procurement during April-September 2010
was 4.8 million tonnes as against 5.4 million
tonnes during the corresponding period of
last year. The average monthly off-take
during the period April-July 2010 (up to
which data are available), was 4.0 million tonnes as against 3.8 million tonnes during
the corresponding period of last year. This
had been reflected in declining stocks in
recent months. The total stock of foodgrains
with the Food Corporation of India (FCI) and
other Government agencies, which stood at
60.9 million tonnes as on June 1, 2010 came
down to 46.7 million tonnes as on October
1, 2010. The stocks of rice and wheat, at 18.4
million tonnes and 27.8 million tonnes,
respectively, were higher than their buffer
stock norms (Chart I.2). Keeping in view the
disproportionately large adverse welfare
effects of high food inflation and the scope
for significant increase in food prices in
response to supply shocks, the policy on food
management has to focus on both adequate
buffer stocks and better supply management.
|
Industrial Performance
I.8 Growth in industrial output has
exhibited volatility in the recent period,
notwithstanding double-digit growth during
October 2009 to July 2010 (except June 2010)
(Chart I.3). Index of Industrial Production (IIP)
recorded a lower growth of 5.6 per cent in
August 2010 compared with 10.6 per cent in
August 2009, mainly on account of negative growth in capital goods and consumer nondurables.
The volatility in capital goods as
measured by coefficient of variation during
April 1994 to August 2010 was placed at 1.1,
the highest recorded among the use-based
industries. The volatile IIP growth can also
be partly attributed to a base effect.
I.9 During April-August 2010,
consumer non-durables growth remained
subdued at 1.6 per cent compared with (-) 1.1
per cent during the same period last year.
Improved kharif production (particularly
sugar) is expected to have a favourable impact on the production of consumer nondurable
goods in the coming months.
|
I.10 Despite some moderation in recent
months, IIP grew by 10.6 per cent during
April-August 2010, as compared to 5.9 per
cent during the corresponding period of last
year. The manufacturing sector which
accounts for 79.4 per cent of weight in IIP, still recorded double digit growth. The
manufacturing sector growth was propelled
by high growth in capital goods and
consumer durables segments (Chart I.4 a and
b and Table I.3). The capital goods sector
has recorded high double digit growth since
December 2009, except in June and August
2010 when it turned negative. The growth pattern, however, has been volatile, with a
sharp acceleration at 72 per cent in July 2010
as compared with a decline of 2.6 per cent
in August 2010. The high volatility in the
data relating to the industrial sector in
general and capital goods sector in particular,
has raised issues about how effectively the
data reflect the underlying momentum in the
industrial sector.
|
Table I.3: 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 2009-10 |
April-August |
April-March 2009-10 |
April-August |
2009-10 |
2010-11 P |
2009-10 |
2010-11 P |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
Sectoral |
|
|
|
|
|
|
|
Mining |
10.5 |
9.9 |
8.0 |
9.4 |
6.3 |
8.8 |
5.9 |
Manufacturing |
79.4 |
10.9 |
5.6 |
11.3 |
88.8 |
81.8 |
90.8 |
Electricity |
10.2 |
6.0 |
6.5 |
4.3 |
4.8 |
9.3 |
3.4 |
Use-Based |
|
|
|
|
|
|
|
Basic Goods |
35.6 |
7.2 |
6.2 |
5.9 |
20.4 |
31.7 |
16.5 |
Capital Goods |
9.3 |
19.2 |
3.4 |
29.0 |
24.7 |
7.2 |
33.1 |
Intermediate Goods |
26.5 |
13.6 |
9.3 |
9.8 |
32.5 |
41.5 |
25.1 |
Consumer Goods (a+b) |
28.7 |
7.3 |
3.6 |
8.6 |
22.4 |
19.7 |
25.4 |
a) Consumer Durables |
5.4 |
26.2 |
18.8 |
27.0 |
19.3 |
24.5 |
21.9 |
b) Consumer Non-durables |
23.3 |
1.3 |
-1.1 |
1.6 |
3.1 |
-4.9 |
3.5 |
General |
100.0 |
10.5 |
5.9 |
10.6 |
100.0 |
100.0 |
100.0 |
P: Provisional. # : Figures may not add up to 100 due to rounding off.
Source: Central Statistics Office. |
I.11 The month-over-month seasonally
adjusted annualised growth rates show
deceleration in all sectors of the IIP during
August 2010 (Chart I.5).
I.12 Growth in the manufacturing sector
is yet to become broad-based although
eleven out of seventeen industries,
accounting for about 51 per cent of the
weight in the IIP, recorded higher growth
during April-August 2010 than
corresponding period of last year. The top
five manufacturing industries, with a
combined weight of 24.6 per cent in the IIP,
grew at around 24 per cent, contributing
about 76 per cent to the overall growth
during this period, slightly higher than last
year (Chart 1.6 a and b).
I.13 During the period April-August
2010, capacity utilisation levels in the
infrastructure sector showed a mixed trend.
While fertiliser and petroleum refinery
production sectors recorded slightly higher
utilisation, finished steel and cement
witnessed lower utilisation as compared to
the same period last year (Table I.4).
I.14 The Order Books, Inventories and
Capacity Utilisation Survey (OBICUS) of
the Reserve Bank indicates that capacity
utilisation, which had remained rangebound
since Q2 of 2009-10, declined
during Q1 of 2010-11 (Chart I.7).
Infrastructure
I.15 The infrastructure sector comprising
six core industries (accounting for 26.6 per
cent of the total weight in IIP) recorded a
growth of 4.0 per cent during April-
September 2010-11, which represents some
moderation as compared to the
corresponding period of the preceding year
(4.5 per cent) (Chart I.8 a and b). The growth
in the infrastructure sector during the period
was led by crude oil, petroleum refinery and
finished steel, while there was lower growth
in cement, electricity and coal production as compared to April-September 2009-10. Core
infrastructure growth continued to la behind
the pace of industrial growth. Preliminary
evidence suggests that this break-down of
relationship between core infrastructure
industries and IIP capital goods is partly due
to increase in imports of crude oil, steel and
coal. The current level of growth momentum
in infrastructure industries, especially
electricity generation, needs to improve
substantially in order to sustain a robust
growth in industry.
Table I.4: Capacity Utilisation in Infrastructure Sector |
(Per cent) |
Sector |
April-August |
2009-10 |
2010-11 |
1 |
2 |
3 |
Finished Steel (SAIL+VSP+ Tata Steel) |
88.9 |
87.0 |
Cement |
84.0 |
77.0 |
Fertiliser |
92.3 |
92.9 |
Petroleum Refinery Production |
103.2 |
104.1 |
Source: Capsule Report on Infrastructure Sector Performance
(April 2009-August 2010), Ministry of Statistics and
Programme Implementation, GoI. |
|
I.16 The electricity generation during
April–September 2010 has recorded a
growth of 4.0 per cent as compared with
6.4 per cent during the same period last
year. Thermal generation achieved a growth
of 2.7 per cent, mainly due to higher growth
in gas based generation (8.5 per cent).
Growth in thermal generation was
constrained by shortage of coal. Natural gas
production, which is not reflected in the
core infrastructure index, increased by 25.2
per cent during April-September 2010 as
against 28.2 per cent growth in the same
period last year on account of higher
production from D6 block in the Krishna-
Godavari (KG) basin.
Services Sector
I.17 The services sector growth recorded
further acceleration in Q1 2010-11 relative
to both the previous quarter and the
corresponding quarter of last year (Chart I.9).
Growth in the ‘trade, hotels, restaurants,
transport, storage and communication’
segment has been robust in recent quarters.
I.18 Lead indicators of services sector
like commercial vehicles production, cell
phone connections, air cargo, and
passengers handled at domestic and international terminals have increased at a
robust pace during the year so far (Table I.5).
Cement production, a lead indicator of
construction activities, seemed to be weaker
than last year.
I.19 To sum up, on the supply side,
although agricultural production during
kharif season 2010-11 is estimated to post
a stronger positive growth over the
previous year, it may still trail behind the
levels attained in 2008-09 and 2007-08,
while the demand continues to grow. The increase in overall demand and also shifts
in the consumption pattern would require
higher production of protein-based food
items as well as manufactured food items
to contain inflation. With growing demand
supply mismatches, the expected
dampening impact of a normal monsoon
on food inflation may not materialise,
unless the rabi production improves
substantially and the policy on food
management focuses on better supply
management. To contain high inflation
emanating from key food items like milk,
meat, fish and eggs, the livestock and
allied sector would have to show sustained improvement The industrial sector shows
volatile trends in growth rates, which raises
questions about sustainability of the double
digit trend. Trends in capacity utilisation
also show some moderation. Going
forward, the sustainability of current
buoyancy in industrial sector would require
significant boost to infrastructure
industries, particularly, electricity, coal, oil
and gas. Cheaper imports, given the current
external environment, could also compete
with domestic manufacturing activities.
Services sector continued to show
acceleration and the lead indicators remain
supportive of further momentum.
|
Table I.5: Indicators of Services Sector Activity |
(Growth in per cent) |
Indicators |
2007-08 |
2008-09 |
2009-10 |
April-August
2009-10 |
April-August
2010-11 |
1 |
2 |
3 |
4 |
5 |
6 |
Tourist arrivals $ |
12.2 |
-3.3 |
3.5 |
-2.9 |
8.5 |
Commercial vehicles production $ |
4.8 |
-24.0 |
35.9 |
-7.4 |
46.8 |
Cement |
8.1 |
7.2 |
10.5 |
13.4 |
4.6 |
Steel |
6.2 |
1.6 |
4.9 |
1.9 |
3.5 |
Railway revenue earning freight traffic $ |
9.0 |
4.9 |
6.6 |
6.6 |
2.3 |
Cell phone connections |
38.3 |
80.9 |
47.3 |
95.3 |
32.8 |
Cargo handled at major ports |
12.0 |
2.2 |
5.7 |
1.8 |
0.6 |
Civil aviation |
|
|
|
|
|
Export cargo handled |
7.5 |
3.4 |
10.4 |
4.0 |
21.3 |
Import cargo handled |
19.7 |
-5.7 |
7.9 |
-9.0 |
28.2 |
Passengers handled at international terminals |
11.9 |
3.8 |
5.7 |
1.8 |
13.0 |
Passengers handled at domestic terminals |
20.6 |
-12.1 |
14.5 |
2.4 |
17.9 |
$ : Data pertain to April-September.
Source: Ministry of Tourism; Ministry of Statistics and Programme Implementation and Society of Indian Automobile Manufacturers (SIAM). |
|