INDIAN ECONOMY : PERFORMANCE , PROBLEMS , FUTURE PROSPECTS

INDIAN ECONOMY : PERFORMANCE , PROBLEMS , FUTURE PROSPECTSSUBMITTED BY MASTER ANAND SINGH KHEECHEE

AGRICULTURE SECTOR

IMPORTANCE OF AGRICULTURE Share in National Income :- About one fourth of Indias GDP depends on the primary sector of which agriculture is the core components. This as high as 51% in 1950-51, and how as low as 14.2% in 2010-11.Share in employment :- Agriculture is the largest employment provider sector in India . It provides employment to around 52.1% of the total labor force.

Supply of Wage Good :- Production of wage good is of central significance in crop farming . Wage good are necessities of life such as wheat , rice , pulses , maize etc.Industrial Raw Material :- agriculture supplies industrial raw material in terms of cotton for textile industrial , seeds for oil industry , sugarcane for sugar industry. Contribution to International Trade and Domestic Trade :- India exports is farm products which makes substantial to forex.Wealth of nation :- Large part of the countrys wealth belongs to agriculture sector . In terms of land fixed assets etc.

PROBLEMS OF INDIAN AGRICULTURELack of permanent means of irrigation Deficiency of financeLack of finance hinders modernization of Indian agriculture Conventional outlook Small and scattered holdingsLack of organized market

ACHIVEMENTS OF AGRARIAN REFORMSRise crop Productivity Increase in Acreage :- Reduced the time lag between sowing and harvesting by HYV technologyChange in cropping pattern in favour of Commercial cropsChange in farmer s outlookSelf sufficiency in food grain Production

AGRICULTURE IN 12TH FIVE YEAR PLANTarget at least 4% growth for agriculture. Cereals are on target for 1.5 to 2% growth. Land and water are the critical constraints. Technology must focus on land productivity and water use efficiency. Farmers need better functioning markets for both outputs and inputs. Also, better rural infrastructure, including storage and food processing States must act to modify APMC Act/Rules, modernize land records and enable properly recorded land lease markets.

INDUSTRIAL SECTOR

INDUSTRIAL SECTOR IN GDPIndustry accounts for 26% of GDP and employs 22% of the total workforce.According to the World Bank, India's industrial manufacturing GDP output in 2012 was 10th largest in the world on current US dollar basis ($239.5 billion),and 9th largest on inflation adjusted constant 2005 US dollar basis ($197.1 billion).The Indian industrial sector underwent significant changes as a result of the economic liberalization in India economic reforms of 1991, which removed import restrictions, brought in foreign competition, led to the privatization of certain government owned public sector industries, liberalized theFDIregime, improved infrastructure and led to an expansion in the production offast moving consumer goods

INDUSTRIAL SECTOR IN 12TH FIVE YEAR PLAN Investment and capacity additions are critical for sustained industrial growth.Need to grow at 11-12% per year to create 2 million additional jobs per year. Growth in 11th Plan is in 8%. Indian industry must develop greater domestic value addition.Tune-up FDI and trade policies to attract quality investment in critical areas.Improve business regulatory framework: cost of doing business, transparency, incentives for R&D, innovation etc.Better consultation and co-ordination in industrial policy making

Some sectors should be given special attention because they contribute most to our objectivese.g. Create large employment: textiles and garments, leather and footwear; gems and jewellery; food processing industriesDeepen technological capabilities: Machine tools; IT hardware and electronicsProvide strategic security: telecom equipment; aerospace; shipping; defence equipmentCapital equipment for infrastructure growth: Heavy electrical equipment; Heavy transport and earth-moving equipmentSectoral plans are being prepared for each of the above with involvement of industry associations and the concerned Ministries

SERVICE SECTOR

SERVICE SECTOR Service sector is the lifeline for the social economic growth of a country. It is today the largest and fastest growing sector globally contributing more to the global output and employing more people than any other sector.

The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy.

In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of services like banking, insurance, trade, commerce, entertainment etc.

INDIAN SERVICE SECTORIn alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. The activities under the purview of the service sector are quite diverse. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry.

One of the key service industry in India would be health and education. They are vital for the countrys economic stability. A robust healthcare system helps to create a strong and diligent human capital, who in turn can contribute productively to the nations growth.

SERVICE SECTOR INCUDES:

1.Trade, hotels and restaurants (THR) 1.1 Trade 1.2 Hotels and restaurants

2. Transport, storage and communication 2.1 Railways 2.2 Transport by other means 2.3 Storage 2.4 Communication

3. Financing, Insurance, Real Estate and Business Services 3.1 Banking and Insurance 3.2 Real Estate, Ownership of Dwellings and Business Services 4. Community, Social and Personal services 4.1 Public Administration and defense (PA & D) 4.2 Other services

SERVICES IN GDPServices constitute a major portion of Indias GDP with a 57 per cent share in GDP at factor cost (at current prices) in 2013-14 an increase of 6 percentage points over 2000-01.

In 2013-14 the growth rate of the services sector at 6.8 per cent is marginally lower than in 2012-13. This is due to deceleration in the growth rate of the combined category of trade , hotels, and restaurants and transport, storage, and communications to 3.0 per cent from 5.1 per cent in 2012-13, despite robust growth of financing, insurance, real estate, and business services at12.9 per cent.

Sub-sector-wise, banking and insurance (11.8 per cent) and real estate, ownership of dwelling, and business services (10.0 percent) were the best performers in terms of growth rate in 2012-13 and the performance of railways (0.3 per cent) followed by hotels and restaurants (0.5 per cent) was the lowest.

CHALLENGESIndias growth story with a services-led growth has been unique for a developing country. The immediate challenge in this sector is revival of growth.

Some services like software and telecom were big ticket items that gave India a brand image in services. While further focus on these services is needed to retain and further our lead, the time has come to focus on some other high potential big ticket items that have high manufacturing-sector and employment linkages

PROSPECTS OF GROWTH IN SERVICE SECTOROne of the major drivers of service sector growth in the post globalization era in India is the IT and ITES sector. That is why NASSCOM (2005) says that, The IT and BPO industries can become major growth engines for India, as oil is for Saudi Arabia and electronics and engineering are for Taiwan. Saudi Arabias oil exports accounted for 46% of GDP in 2004; Taiwans electronics and engineering exports accounted for 17% of GDP in the same year. . Indias IT and BPO industries could account for 10-12% of Indias GDP by 2015

In addition, there is a huge potential for growth in the services sector because of increase in disposable income, increasing urbanization, growing middle class, a population bulge in the working age groups providing demographic window of opportunity, and emergence of a wide array of unconventional /new services like IT, ITES, new financial services (ATMs , credit cards) and tourism services (eco-tourism, health tourism) etc.

RAILWAYSIndias FDI policy restricts FDI in rail transport, except in mass rapid transit systems. FDI and privatization in the railways could be the next big ticket reforms. A proposal has been initiated by Indian Railways, for making suitable changes in the existing FDI policy in order to allow FDI in railways, to foster creation of world class rail infrastructure. The proposal envisages allowing FDI in all areas of the rail sector except railway operations. Even in railway operations, FDI is proposed in PPP projects, for suburban corridors, high speed train systems, and dedicated freight lines. While privatization of railways has been successful in some countries like Japan, it has failed in some others like the UK. So this proposal needs to be examined carefully and quickly to allow privatization/ FDI in areas where it is feasible.

TOURISMIndias share in world tourist inflows was only 0.64 per cent in 2012 (rank 41), while that of the USA was 6.47 per cent (rank 2) and China 5.57 per cent (rank 3). Indias share in world tourism expenditure is relatively higher at 1.65 per cent (rank 16) implying that foreign tourists spend relatively more in India. Singapore, a small country, attracted 11.10 million tourists in 2012, while a large country like India attracted only 6.97 million foreign tourists during 2013.

Some suggested measures include creating world class tourism infrastructure even by PPP; addressing multiple taxation issues; skill and etiquettes training to cater to the needs of tourists; special focus on cleanliness at tourist sites and safety of tourists; using the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) for creating permanent assets like tourism infrastructure and facilities; organizing mini India cultural shows on a daily basis at important tourist sites that will not only attract tourists but also generate employment for Indian artists; and Implementing urgently visa on arrival and E visa facilities at 9 airports to 180 countries barring 8 prior reference countries, a decision on which has already been taken.

ENERGYCommercial energy demand will increase at 7% p.a. if GDP grows at 9%. This will require a major supply side response and also demand management Energy pricing is a major issue. Petroleum and Coal prices are significantly below world prices and world prices are unlikely to soften.

INDIAN POWER SECTOR

FUTURE PROSPECTS IN POWER SECTORWe must set a target of 100,000 MW capacity in 12th Plan (against achievement of 50,000 MW in Eleventh Plan)Coal availability will be a major constraintHydro-power development seriously hindered by forest and environment clearance procedures. Himalayan States complain strongly.Electricity tariffs not being revised to reflect rising costs. Regulators are being held back from allowing justified tariff increases.

Nuclear power programme must continue with necessary safety review.Solar Mission is seriously underfunded.Need longer term energy solution for cooking in rural areas. Expand LPG network (with cash subsidy for the deserving, not subsidized prices). Also use off grid solar and bio-mass energyWind power development, including off shore wind power, needs to be encouraged

ENERGY TARGETS

HEALTHBetter health is not only about curative care, but about better prevention, Clean drinking water, sanitation and better nutrition, childcare, etc. Convergence of schemes across Ministries is needed.Expenditure on health by Centre and States to increase from 1.3% of GDP to at least 2.0%, and perhaps 2.5% of GDP by end of 12th PlanDesperate shortage of medical personnel. Need targeted approach to increase seats in medical colleges, nursing colleges and other licensed health professionals Health insurance cover should be expanded to all disadvantaged groups Focus on women and children; ICDS needs to be revamped

EDUCATION AND SKILL DEVELPOMENTMust aim at universalisation of secondary education by 2017Must aim at raising the Gross Enrolment Ratio (GER) in Higher Education to 20 percent by 2017 and 25 percent by 2022Must focus on quality of education. Must invest in faculty development and teachers trainingMust aim at significant reduction in social, gender and regional gaps in education. Targets to be set for this purposeResearch and innovation in higher education must be encouraged with cross-linkages between institutions and industry

INFRASTRUCTURERailways Western and Eastern Dedicated Freight Corridors must be completed by the end of the Twelfth PlanHigh Speed Rail link between Delhi-Mumbai and Delhi-Kolkata in the Twelfth Five Year PlanComplete the linkages between the ports and the existing road and rail network. Need to deepen existing ports. Increase bulk/container capacityEnsure sufficient provision for maintenance of the already-built roadsInvest in unified tolling and better safety on highways Improve bus services/public transport in smaller cities, towns and districts.

CONTRIBUTION OF SECTORS IN INFRASTRUCTURE

HIGHLIGHTS OF 11TH FIVE YEAR PLANAccelerate GDP growth from 8% to 10% Increase agricultural GDP growth rate to 4% Create 70 million new work opportunities.Increase literacy rate for persons of age 7 years or above to 85%Target growth: 9% ; Growth achieved:7.9%

12TH FIVE YEAR PLANThe government on 4th October approved the 12th five year plan (2012-17) that set average growth target at 8.2 percent. The theme of the Approach Paper is Faster, Sustainable and more inclusive growth .

OBJECTIVESBasic objective : Faster, More Inclusive, and Sustainable Growth.Could aim at 9.0 to 9.5 percentFor growth to be more inclusive we need: Better performance in agricultureFaster creation of jobs, especially in manufacturingStronger efforts at health, education and Infrastructure. Special plans for disadvantaged/backward regions

SECTOR WISE GROWTH TARGETS

GROWTH RATE IN PERCENTAGE

SOME PRIORITIESHealth and Education received less than projected in Eleventh Plan. Allocations for these sectors have increased in 12th Plan Health, Education and Skill Development together in the Centres Plan have increased by 1.2 percent point of GDPInfrastructure, including irrigation and watershed management and urban infrastructure, will need additional 0.7 percentage point of GDP over the next 4 years Use of PPP must be encouraged, including in the social sector, i.e. health and education. Efforts on this front need to be intensified

Chart1632539

Total Installed Capacity: 1,44,912 MW

Sheet1Total Installed Capacity: 1,44,912 MWThermal63Hydro25Nuclear3Renewable including small hydro9To resize chart data range, drag lower right corner of range.