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, is projected 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, more than 7 million telephone
connections are being added every month during the current year. The 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 in December 2007 and 21,000 in
an intra-day trading in January 2008.
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 inflows 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.
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