Economic Survey 2005-2006

Economic Survey > General Review > Review of Developments > Production


Review of Developments



1.53  As per the 4th advance estimates, total foodgrains production is estimated at 204.6 MT in 2004-05 compared to 213.5 MT in 2003-04.  The first advance estimates of foodgrains production for 2005-06 released on September 19, 2005 placed kharif production at 105.3 MT, up by about 2 MT from the previous year’s level. Rabi sowing is complete, and the weather remaining favourable, rabi output is expected to remain at 101.2 MT, the same as in Rabi 2004-05. As per the latest information available in February 2006, total foodgrains production is projected to increase by 2.3 per cent from 204.6 MT in 2004-05 to 209.3 MT in 2005-06. Since the decline in output, particularly that of coarse cereals, in drought-affected 2004-05, the recovery to the record output of 2003-04 remains incomplete.  The decline in the kharif output of coarse cereals since 2003-04 is expected to continue in the current year. Kharif oilseeds production for 2005-06 is estimated at 14.6 MT as per the first advance estimates. The rabi oilseeds production may reach the target level of 10.4 MT with favourable weather. The first advance estimates for 2005-06 put sugarcane output at 257.7 MT, a sharp turnaround from 232.3 MT in 2004-05. However, prospects of cotton, jute and mesta production in 2005-06 are not considered better than in 2004-05.

1.54  The pick up in industrial output observed since the second quarter of 2003-04 has continued. As per the index of industrial production (IIP), during the period April-December, 2005, growth was 7.8 per cent compared to a growth of 8.6 per cent in the corresponding period of 2004.  In the first half of 2005-06, however, on a cumulative basis (for example, April-May, April-June, etc.), IIP growth exceeded the corresponding growth in 2004-05. However, this superior performance was reversed from October 2005, and IIP growth for the first nine months of 2005-06 turned out to be lower than that in the corresponding period of 2004-05.

1.55  The current year has been characterised by vigorous growth of manufacturing, one of the three sub-sectors of industry.  In three out of first nine months (May, June and October, 2005, with a record 13.2 per cent growth in June 2005), year-on-year growth was in double digits. The performance of the other two sub-sectors of mining and electricity within industry, however, was worse than in 2004-05.  This disappointing performance of mining and electricity pulled down the overall performance of the industrial sector.

1.56  Within manufacturing, a faster growth of the capital goods sector at 15.7 per cent in April-December 2005 relative to the growth in 13.8 per cent in the corresponding period of the previous year provided strong corroborative evidence on the investment rally in the economy. Second only to capital goods, in the use-based classification of industries, durable consumer goods grew the fastest at 13.6 per cent in the first nine months of the current year.  The continued rapid growth in consumer durables since 2003-04 may reflect the impact of fast expanding retail consumer credit in the banking sector. Consumer goods, both the durables and non-durables segments, recorded improved performance with double digit growth in the last two years.

1.57  Performance of 17 industries at the two-digit level during April-December 2005 underlined a fairly broad-based pattern of growth within manufacturing. Seven industries, accounting for almost 34 per cent of the total weight in IIP, grew at more than 10 per cent. The most striking performers were textile products (18.6 per cent), beverages (16.4 per cent) and basic metals (15.0 per cent). Five industries, contributing around 18 per cent of the IIP, experienced negative growth during the first nine months of the current year, out of which, wood products, metal products, leather products, and food products, experienced the sharpest drops. 

1.58  Among individual industries, automobiles continued to expand with buoyant growth in all segments. Indian vehicles, particularly passenger cars and three-wheelers, are making significant inroads into overseas markets, with exports from such categories accounting for 18-19 per cent of current output levels. Output of passenger cars is expected to cross the million mark in the current year compared to 8,000 in 1950-51. While output of cotton textiles increased by 10.2 per cent in April-December 2005, that of other major textiles – made of wool, silk and manmade fibres – declined.  There was acceleration in the growth of both output and exports of readymade garments, which were removed from the ambit of small-scale reservation from March 28, 2005. 

1.59  Cement, buoyed by the resurgence in construction activity in the economy, grew by 10.9 per cent in April-December 2005, up from 6.9 per cent in the corresponding previous period. Steel production, on an upswing for three years, posted a growth of 7.1 per cent during April-December 2005, which was slightly lower than the 7.5 per cent recorded in the corresponding previous period; but is expected to improve in the last quarter of the current year because of the low base in the last quarter of the previous year. Among other core industries, some shortfalls were recorded for energy products, particularly in the petroleum segment. Crude oil production has declined during the current year on account of unanticipated supply shocks, while growth in coal production has also reduced to 5.7 per cent in April-December 2005-06 compared with 7.3 per cent in April-December 2004-05. Reduction in coal supply has reportedly affected electricity generation by pulling down growth in the thermal power segment. 


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