labels: industry - general, economy - general, union budget 2006
Economic Survey 05-06: Outlook rosynews
28 February 2006

The Economic Survey for the financial year 2005-06 presented yesterday by the government gives a cautiously optimistic outlook for next year. While there are major risks to a sustained economic growth, the ministry of finance believes the Indian economy has picked up sufficient momentum to maintain growth rates in excess of 8 per cent per annum.

The Survey says, "the growth trend for the last three years appears to indicate the beginning of a new phase of cyclical upswing in the economy from 2003-04. The odds are loaded heavily in favour of a continuation of the growth momentum observed in the last three years. A virtuous cycle of growth and savings, that appears to be already underway, is likely to continue for some years to come."

Given below are excerpts from the Survey, giving the outlook for various sectors for the coming year.

Industry Outlook
With a perceptible improvement in the investment scenario, both domestic and foreign, coupled with the policy measures towards further liberalisation and simplification of the norms guiding such investment, the overall productive capability of the industrial sector, as a whole, is likely to increase substantially.

With a likely pick up in the production of crude oil, the mining sector is expected to improve its performance in the near future. Recent softening in the price of oil in the international market, if sustained, would have a positive impact on the industrial sector.

The electricity sector, however, remains a cause of concern as private investment in this sector has remained almost stagnant. The hardening of the interest rates could also be another dampening factor for sustained growth in investment.

While various sectors within manufacturing registered an impressive increase in the volume of production and exports, this was largely input driven and the growth in total factor productivity was hardly noticeable. Sustained efforts to remove bottlenecks hindering the productivity and efficiency of the manufacturing sector would boost the performance of the manufacturing sector substantially.

Agriculture Outlook
Prospects of agricultural production in 2005-06 are considered to be bright with near normal rainfall. The delayed monsoon and its somewhat uneven distribution over time and space had some limited adverse impact on the kharif crops (sown in June-July and grown mainly under un-irrigated conditions).

Coarse grains, pulses, oilseeds, cotton and plantation were affected the most, while the impact was less on the production of rice and sugarcane, where access to irrigation is the greatest. However, loss of kharif crop is expected to be compensated by the rabi output. Total food grains production is estimated to increase marginally in 2005-06.

The first advance estimates of food grains production for 2005-06 released by the ministry of agriculture put kharif production at 105.3 MT, up by 2 MT from the previous year's level. Production of rabi food grains would be around last year's level of 101.3 MT provided the weather remains favourable.

Infrastructure Outlook
During 2005-2006, so far, the infrastructure sector experienced mixed outcomes. The overall index of six core industries having a direct bearing on infrastructure and accounting for 27 per cent weight in the Index of Industrial Production (IIP), in April-December, 2005, registered a growth of 4.5 per cent, which was lower than the 6.4 per cent registered during April-December, 2004.

In the first nine months of 2005-06, crude oil production registered a decline, and there was deceleration in growth of coal, electricity, refinery throughput and steel sectors. Growth of cement production, however, accelerated during this period.

The committee on infrastructure, headed by the prime minister, has estimated the investment requirements as: Rs1,72,000 crore in the roads sector by 2012; Rs40,000 crore for airports by 2010; and Rs50,000 crore for sea-ports by 2012. A substantial share of this investment is expected to come from the private sector. It has been estimated that India has the potential to absorb $150 billion of FDI in the next five years in the infrastructure sector alone.

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Economic Survey 05-06: Outlook rosy