Current State of the Indian Economy.docx
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Current State of the Indian Economy
Industrial Growth
Agriculture and Monsoon
Stock Market Trends
Core Infrastructure Industries
Trends in Inflation
Fiscal Management
Telecom
Monetary Indicators
Capital Inflows
The current scenario of Indian economy has been characterised by optimistic growth and strong
macro-economic fundamentals, particularly with tangible progress towards fiscal consolidation and a
strong balance of payments position. Gross Domestic Product (GDP), at current market prices, isprojected at Rs. 46,93,602 crore in 2007-08 by the Central Statistical Organisation (CSO) in its
advance estimates (AE) of GDP. While, the GDP at factor cost, at constant 1999-2000 prices, is
projected to grow at 8.7 per cent in 2007-08.
The industrial sector has witnessed a moderate slowdown in the growth during the first eight
months of the current fiscal, till November 2007. The growth achieved, during April-November 2007,
by the industrial sectors has been 9.2 per cent. The capital goods have grown at an accelerated pace,
over a high base attained in the previous years, which augurs well for the required industrial
capacity addition. While, the consumer durables showed a negative growth during the period,
thereby forcing a visible decline in the growth of the total consumer goods basket, despite
reasonable growth in the non-durables.
India's telecom sector has been one of the biggest success stories of market oriented reforms. With
more than 270 million connections, India's telecommunication network is the third largest in the
world and the second largest among the emerging economies of Asia. The total number of
telephones has increased from 76.53 million on March 31, 2004 to 272.88 million on December 31,
2007. While 63.8 million telephone connections were added during the 12 months of 2006-07, morethan 7 million telephone connections are being added every month during the current year. The
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tele-density has also increased from 12.7 per cent in March 2006 to 23.9 per cent in December 2007.
Further, the share of wireless phones has also increased from 24.3 per cent in March 2003 to 85.6
per cent in December 2007.
The infrastructure sector has been expanding on a massive scale. The Index of Six core-infrastructure
industries, having a direct bearing on infrastructure, stood at 243.0 (provisional) in December 2007
and registered a growth of 4.0 per cent (provisional) compared to a growth of 9.0 per cent in
December 2006. During April-December 2007-08, six core-infrastructure industries registered a
growth of 5.7 per cent (provisional) as against 8.9 per cent during the corresponding period of the
previous year. Coal production grew by 4.9 per cent (provisional) as compared to an increase of 4.6
per cent during the same period of 2006-07. While, electricity generation grew by 6.6 per cent
(provisional) as compared to 7.5 per cent during the same period of 2006-07.
In terms of the Wholesale Price Index (WPI), inflation was 3.9 per cent as on January 19, 2008, as
compared to 6.3 per cent a year ago. In primary articles, there was a sharp deceleration in inflation
to 3.8 per cent as on January 19, 2008, as compared to 10.2 per cent a year ago. They contributed 22
per cent to overall inflation as against 35.4 per cent in the previous year. Similarly, in case of
manufactured products, year-on-year inflation as on January 19, 2008, was 3.9 per cent compared to
5.9 per cent in the corresponding period of 2006-07. They contributed 55.2 per cent of the year-on-
year inflation. Further, fuel, power, light and lubricants, with a inflation rate of 4.5 per cent,
contributed 30.4 per cent, which is more than twice its weight of 14.2 per cent in the index.
The monetary sector also continues to be growing at a sustainable rate during 2007-08 to serve the
twin objectives of managing the transition to a higher growth path and containing inflationary
pressures. The cumulative increase in the stock of M3 in 2007-08 has remained above the
cumulative growth in 2006-07 and was 13.3 per cent on January 4, 2008, as compared to 12.2 per
cent on January 5, 2006. Similarly, net foreign exchange assets (NFA) of the RBI, on year-on-year
basis as on January 4, 2008, expanded by 39.1 per cent as against 26.1 per cent on the
corresponding date of the previous year.
In the secondary market segment, the market activity expanded further during 2007-08 with BSE
and NSE indices scaling new peaks of 21,000 and 6,300, respectively, in January 2008. The main
reasons being the larger inflows from Foreign Institutional Investors (FIIs) and wider participation of
domestic investors, particularly the institutional investors. During 2007, on a point-to-point basis,
Sensex and Nifty Indices rose by 47.1 and 54.8 per cent, respectively. While the climb of BSE Sensex
during
2007-08 so far was the fastest ever, the journey of BSE Sensex from 18,000 to 19,000 mark was
achieved in just four trading sessions during October 2007. It further crossed the 20,000 mark inDecember 2007 and 21,000 in an intra-day trading in January 2008.
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Progress in fiscal consolidation has been satisfactory in the post-Fiscal Reforms and Budget
Management Act (FRBMA) period. The fiscal deficit of the Centre, as a proportion of GDP, came
down from 5.9 per cent in 2002-03 to 3.4 per cent in 2006-07 and is estimated to further decline to
3.3 per cent in 2007-08 [Budget Estimate (BE)] (3.2 per cent based on revised GDP estimates).Similarly, the revenue deficit declined from 4.4 per cent in 2002-03 to 1.9 per cent in 2006-07 and is
estimated to further decline to 1.5 per cent in 2007-08 (BE).
India's external economic environment continued to be supportive with the invisible account
remaining strong and stable capital flows. As a proportion of total capital flows and on a net basis,
foreign investment has shown a mixed trend in the current year. In 2006-07, the proportion stood at
33.5 per cent, while it rose to 43.4 per cent in the first half of 2007-08. Foreign direct investment
(FDI) grew appreciably on both gross and net basis. On a gross basis, FDI inflow into India was at US$11.2 billion in the first six months of 2007-08. FDI inflows were broad-based and spread across a
range of economic activities like financial services, manufacturing, banking services, information
technology services and construction. While, net portfolio investment inflow was US$ 18.3 billion in
April-September 2007, more than double the inflow during 2006-07.
There are various economic indicators reflecting the current state of the economy.