INDIAN ECONOMY-OVERVIEW

INDIAN ECONOMY-Sectoral Overview

Agriculture Sector

Agriculture provides the principal means of livelihood for over 60% of India's population. Despite a steady decline in its share of the GDP, it remains the largest economic sector in the country. Low and volatile growth rates and the recent escalation of agrarian crisis in several parts of the Indian countryside are a threat not only to national food security, but also to the economic well-being of the nation as a whole.

GDP from agriculture has more than five times, from US$ 23.24 billion in 1950-51 to US$ 121.39 million in 2008-09.

According to the First Advance Estimates of Production of Foodgrains, Oilseeds and other Commercial Crops for 2009-10 released by the Department of Agriculture and Cooperation , production of rice, coarse cereals, pulses and oilseeds is expected to decline by 17.9%, 19.7%, 7.5% and 14.8% respectively during the Kharif season of 2009-10 as compared to the production of these crops in the Khrif season of 2008-09. However, very little part of the anticipated kharif production of these crops accrues in the period July-September (Q2), 2009. The above mentioned crops account for about 18% of GDP in ‘agriculture, forestry and fishing’ sector. Therefore, bulk of the estimates of GDP of this sector to the extent of 82% in Q2 are based on the anticipated production of fruits and vegetables, other crops, livestock products, forestry and fisheries, which are estimated to register positive growth rates in the range of 3 to 4 per cent.

Industrial Sector

The loss of growth momentum in the industrial sector was evident during 2008-09 (April-February) with the year-on- year expansion being 2.8 per cent as against 8.8 per cent in the corresponding period of the previous year. The intra-year movement of growth in industrial production reveals that the Index of Industrial Production (IIP), which witnessed an average growth of around 5.6 per cent during the first four months of 2008-09 (April to July), slipped to a low of 1.7 per cent during August, before recovering to 6.0 per cent in September. The IIP growth, however,decelerated in October-November 2008 and January 2009 and recorded a negative growth during December 2008 and February 2009. Before this, IIP had registered negative growth in April 1994.

Foreign Direct Investment (FDI) up to 100% is permitted in all manufacturing activities except where the foreign investor had an existing joint venture/technical collaboration/trademark agreement in the same field of activity.

Sevices Sector

Among the services sectors, the key indicators of railways, namely, the net tonne kilometers and passenger kilometers have shown growth rates of 11.2 per cent and 6.3 per cent, respectively in Q2 of 2009-10. In the transport and communication sectors, the production of commercial vehicles, cargo handled at major ports, cargo handled by the civil aviation, passengers handled by the civil aviation and the total stock of telephone connections (including WLL and cellular) registered growth rates of 4.5 per cent, 2.9 per cent, (-) 1.3 per cent, 15.8 per cent and 43.9 per cent, respectively in Q2 of 2009-10 over Q2 of 2008-09. The
other key indicators, namely, aggregate bank deposits, and bank credits have shown growth
rates of 19.8 per cent, and 12.6 per cent, respectively in Q2 of 2009-10 over Q2 of 2008-09.

Indian States and Union Territories

The country houses 29 states and 6 union territories. Each of the Indian state and union territory of India is blessed with several investment opportunities depending on their geographical location and availability of natural resources. These opportunities are further enhanced by the rapid technological advancements taking place in almost all states that enhance the ability to innovate and grow. There exists plethora of diversified investment opportunities across India and the respective state Governments are taking progressive steps such as development of powerful infrastructure and formulating conducive and stable policies to harness the same. The state Governments have devised investor friendly policies in terms of incentives and concessions offered for several sectors such as biotechnology, infrastructure and information technology among others to promote FDI into their respective states. A healthy competition has emerged among states to attract investment in their states and this has proved to be beneficial for the potential investor

Sectoral Opportunities

The Indian growth story seems to be on a roll and India has emerged as the fourth largest economy in the world on a purchasing power parity basis.The quality of business environment in India has improved manifolds in the recent years . The strong fundamentals underlying the Indian economy make it an obvious choice for investors all over the world.

The government of India has put in place a liberal and transparent FDI policy. In the post liberalization era, a number of initiatives have been taken to attract FDI in several sectors. This includes opening of many new sectors to FDI, raising FDI equity caps in sectors already opened and procedural simplification. Today, the FDI policy in India is widely reckoned to be among the most liberal in the emerging economies and FDI up to 100% is allowed under the automatic route in most sectors and activities.

Vast investment potential exists in sectors such as biotechnology, retail, real estate, roads and highways, power, telecommunications, civil aviation, special economic zones, healthcare among others.

These investments are encouraged by the facts that India has a large pool of skilled and competitive manpower, huge research and development base, Government support and conducive policies, growth in the Indian domestic market owing to higher disposable incomes, abundant natural resources required to set up industries, etc.

Success Stories

Overseas investors are looking at India as an attractive investment destination owing to the prospects of high returns. A number of Corporates and Multi National Companies from all over the world have established business in India and have expanded over the years.

India has witnessed a number of success stories - both Indian and multinational firms have registered higher profits, increased turnover and higher sales over the years. This has induced them to reinvest profits and inject fresh capital into their processes in order to reap the benefits of the India growth story.

Investments have been made by corporates across the board and almost all the sectors have seen inflow of funds. Global players such as Daimler Chrysler, General Motors, Ford, LG Electronics, Samsung, Sony, Amway, Tupperware, Pepsico, McDonald's, IBM, Oracle, Microsoft, Aviva, Nortel, Nokia among others have benefited from their operations in India and have made expansion plans for the country. The companies plan to expand by way of product diversification, setting up manufacturing base in India, increasing the existing production capacity, establishing research centres in India, etc.

The reform process initiated during the late eighties and early nineties have begun to show their impact and India is taking huge strides in the course of growth and development. However, recognizing that there is no room for complacency, Indian policy makers are moving ahead with due caution and at the same time integrating India with the global economy.