ECONOMIC SURVEY 2000-2001: Macroeconomic overview...3

1.35  The performance of infrastructure in the current year is mixed. There is a significant deceleration of growth rate in electricity generation. Among the other infrastructure sectors, there is deceleration of growth rate for cargo handled at major ports from 9.2 per cent in April-December 1999 to 3.9 per cent in April-December 2000 and for revenue earning goods traffic on railways from 8.0 per cent in last year to 5.2 per cent this year. However, the growth rate of new telephone connections increased significantly from 33.4 per cent last year to 29.8 per cent this year .

1.36  The average growth rate of six core and infrastructure industries (i.e. electricity, crude oil, refinery, coal, steel, and cement), having a weight of 26.7 per cent in overall IIP, at 7.7 per cent in April-December 2000 is lower than that of 9.1 per cent achieved in April-December 1999. Petro-refinery production has improved its growth rate from 22.0 per cent in April-December 1999 to 25.9 per cent in April-December 2000. While steel and coal have performed well in the current year, performances of electricity and cement are poor.

1.37  Various policy measures were announced for boosting infrastructure growth during the current year. These include :

• Opening of domestic long distance service without any restriction on the number of operators.
• Permitting BSNL and MTNL to enter as third cellular operator in their respective circles.
• Introducing a revenue sharing regime in place of existing fixed licence fee for both basic and cellular service operators.
• Permitting the operation of a fourth cellular operator in all the circles.
• Permitting an additional basic service operator.
• Developing a scheme for securitisation of dues of central sector power and coal utilities for assisting the SEBs in clearing dues. Central Government support is linked to reforms in the operation of SEBs.
• Proposal to divest Government equity in domestic carrier, Indian Airlines and international carrier, Air India.
• Decision to upgrade to international standards the airports at Hyderabad, Ahmedabad, Goa, Kochi and Amritsar.
• Reduction of customs duty for boosting infotech, telecom and other knowledge based industries.
• Extension of tax benefits available for infrastructure to urban infrastructure viz. water treatment and solid waste management.

Extension of tax holiday for housing projects to projects completed before 31.3.2003 (present limit 31.3.2001).

1.38  Plan and non-plan expenditure of the Central Government on various components of social sectors has increased from of Rs. 9608 crore in 1992-93 to Rs. 36,270 crore in 2000-01 (BE), an increase of about four times in a matter of just eight years. As a proportion of total expenditure, the combined plan and non plan expenditure of the Centre rose from 8.1 per cent in 1992-93 to 10.7 per cent in 2000-01. The plan expenditure of the Centre, as a percentage of GDP at current market prices on major schemes of social sectors has been hovering between 1.1-1.2 per cent during the last decade. However, the central plan outlay in 2000-01(BE), as compared to the previous year’s revised estimate increased by 24.3 per cent for the education sector as a whole and 26.5 per cent for elementary education programmes; by 29.8 per cent for health sector programmes; by 16.8 per cent for women and child development; and by 12.8 per cent for family welfare schemes.

1.39  National programmes combatting major public health problems have resulted in steady improvement in basic indicators of human development. While the crude death rate declined from 12.5 per thousand in 1981 to 9.8 in 1991, and further to 8.7 in 1999, the infant mortality rate per thousand declined from 110 in 1981 to 80 in 1991 and further to 70 in 1999. As far as the educational status of population is concerned, the literacy rate had increased from 43.6 per cent in 1981 to 52.2 per cent in 1991 and to 62 per cent in 1997 as a result of intensifying the efforts under the national literacy mission.

1.40  In the seven years of post-reform period, from 1992-93 to 1998-99, the average annual real wage for non-agricultural sector was Rs. 2.64 compared to Rs. 2.29 for the pre-reform period, i.e. 1987-88 to 1991-92, for which all-India estimates are available.

1.41  Alleviation of poverty remains a major challenge before the nation. A comprehensive All India Household Consumer Expenditure Survey is undertaken roughly every 5 years which also forms the basis for estimating the level of poverty in the country. Comparable estimates based on a consistent methodology and data set are available until 1993-94. The estimated magnitude of poverty remained fairly high until the late 1970s. The proportion of people below the poverty line has been declining since the early 1980s along with the achievement of higher economic growth. The 1993-94 estimates placed the all India poverty ratio at 36 per cent .

1.42  Some of the key results of the 55th Round of the Household Consumer Expenditure Survey of the National Sample Survey Organisation (NSSO) covering the period July 1999 to June 2000, have now become available showing a very significant decline in poverty to 26 per cent based on a 30-day recall and 23.3 per cent on a 7-day recall methodology. These two sets of estimates may not be strictly comparable to the earlier estimates of poverty. Nonetheless, they provide clear evidence indicating a substantial decline in the overall poverty ratio in the country during the 1990s.

1.43   Stabilising population is an essential requirement for promoting sustainable development and its equitable distribution. The National Population Policy (NPP-2000) recognises the fact that population stabilisation is as much a function of making reproductive health care affordable, as other life quality improving services such as primary and secondary education, sanitation, drinking water, housing, transport, communication and empowering women and enhancing scope for their employment. In pursuance of the NPP 2000, a national commission on population has been set up. State level commissions on population have also been set up with the objective of ensuring implementation of the policies.

1.44   National health programmes are implemented to control communicable and non-communicable diseases like malaria, tuberculosis, leprosy, blindness, AIDS, cancer etc. Strengthening of disease surveillance and response systems has also been undertaken to prevent outbreak of infectious diseases. HIV/AIDS is now sought to be projected as a socio- economic issue and not merely as a public health matter. The second phase of national AIDS control programme was launched in November 1999 at an estimated cost of Rs.1,425 crore over the next five years. Efforts have been to achieve zero incidence of polio by the end of the year 2001. The incidence of polio has sharply declined with many states reporting not a single case or only one or two cases of wild polio virus. The virus is, however, reported to be still active in U.P. and Bihar.

1.45   The National Housing and Habitat Policy, 1998, has been formulated with the objective of creating 20 lakh dwelling units each year. It also seeks to ensure that housing, along with supporting services, is treated as a priority sector at par with infrastructure. The central theme of this policy is the much expanded role of private sector for tackling housing and infrastructure problems. The Government recognises the urgent need to provide fiscal concessions and carry out legal and regulatory reforms for creating a conducive environment for housing construction.

1.46   The total flow of funds sanctioned to the housing sector in 1999-2000 was Rs. 21623.51 crore for 32.15 lakh housing units in the country under various housing finance schemes. This represented an increase of 27.34 per cent over the previous year. In the current year (upto September, 2000) a total of Rs. 11791.27 crore has been sanctioned for 19.63 lakh housing units. In terms of disbursements, a total of Rs. 19475.88 crore was disbursed for 28.55 lakh housing units in 1999-2000, representing an increase of 23.81 per cent over the previous year. In the current year (upto September, 2000) a total of Rs. 8481.97 crore have been disbursed for 6.93 lakh housing units.

Fiscal developments

1.47  The Budget for 2000-2001 was formulated in the backdrop of a series of exceptional exogenous events such as the 50 day war in Kashmir, long months of political uncertainty before the general election, the super cyclone in Orissa, a somewhat weak monsoon and the continued fragility in world economic recovery. These developments led to an unanticipated expenditure on national defense, elections and the super cyclone during 1999-2000. Furthermore, the residual impact of the Fifth Central Pay Commission, the need for special fiscal assistance to the states combined with shortfalls in receipts from disinvestment and revenue, exacerbated the fiscal deficit during 1999-2000. As a proportion of GDP, the Centre’s gross fiscal deficit (exclusive of states’ & UT’s share of small savings) estimated at 5.6 per cent in the revised estimate for 1999-2000 now stands at 5.5 per cent on the basis of provisional and unaudited figures. The Budget for 2000-2001 envisaged a fiscal deficit target of 5.1 per cent of the GDP. The primary deficit (fiscal deficit net of interest payments), which reflects the current fiscal stance of the Government, is budgeted at 0.5 per cent of GDP in 2000-01 as against 0.8 per cent in 1999-2000 .

1.48  With a view to put India on a higher growth path, the Union Budget (2000-2001) indicated a seven fold strategy which included the following elements: To strengthen the foundations of growth of the rural economy, nurture knowledge based industries, strengthen and modernize traditional industries, remove infrastructure bottlenecks, accord high priority to human resource development with special emphasis on poorest and weakest sections of society, strengthen the country’s role in the world economy through rapid growth of exports, higher foreign investment and prudent external debt management, and establish a credible framework of fiscal discipline.

1.49  The Fiscal Responsibility and Budget Management Bill, 2000, was introduced in the Lok Sabha in December 2000. The Bill provides for a legal and institutional framework to eliminate revenue deficit, bring down the fiscal deficit, contain the growth of public debt and stabilise debt as a proportion of GDP within a time frame. The proposed law casts an obligation on the Government itself for strengthening the institutional framework for conduct of prudent and accountable fiscal policy and pave the way for promoting greater macro-economic stability. This covers only the finances of the Central Government. The principles of fiscal responsibility have been defined in relation to deficit, borrowing and debt.

1.50   The Bill focuses on two deficit indicators, viz., revenue deficit and fiscal deficit, and provides normative ceilings within a time frame for chosen fiscal indicators. The Bill proposes elimination of revenue deficit and progressive reduction of the fiscal deficit to not more than 2 per cent of Gross Domestic Product within a period of five financial years following the promulgation of the law. Besides, the proposed Bill contains provisions, which will ensure flexibility in fiscal management under extraordinary circumstances like natural calamities and war. Under borrowing related principles, it is proposed to prohibit certain types of borrowing from the Reserve Bank of India and under the debt related principles, it is proposed to prescribe a limit on the debt stock. Accordingly, the Bill envisages that within a period of ten financial years, the total liabilities (including external debt at current exchange rate) would not exceed fifty per cent of the estimated GDP.

1.51  The fiscal parameters for the nine months of the current fiscal year (April-December 2000) reveals a decline in gross fiscal deficit from Rs. 67082 crore in April-December 1999 to Rs. 64628 crore in April-December 2000 due to better revenue receipts and lower growth in expenditure in the current year. Revenue receipts (net to Centre) increased by 15.3 per cent; other receipts (mainly disinvestment receipts) were only a miniscule Rs.236 crore against a budgeted target of Rs.10000 crore. Total expenditure at Rs. 204821 crore had an increase of only 7.7 per cent over the same period of last year. Borrowings and other liabilities at Rs. 64628 crore indicates a decline of 3.7 per cent over last year.