Gross Domestic Product (GDP)
India's Real GDP growth (in percent)
Source: CSO; Forecasts- RBI (‘12); and World Bank - World Economic Outlook Database, Oct 2010 (‘13-‘15)
GDP forecasts for 2011-15 suggest a consistent 8 percent growth, which is a notch lower than the 8.6 percent growth achieved in 2010-11. Spiraling inflation, linked to crude oil prices (India imports most of its petroleum requirements) and food prices, continues to be a cause of concern. Analysts on the same front opine that given that challenges are aplenty, ranging from inflation to current account deficits, the fact is India can get quite a lot of growth simply by removing bottlenecks in its economy; and it can still place itself on overall 8% trajectory for the long term without undertaking the kind of deep reforms that many may have hoped for.
From a traditional agro-economy till the 1970s, the Indian economy has transformed into a predominantly services-oriented economy, especially since the mid-1980s. During 1970-71, the share of agriculture, services and industry to the country’s total GDP stood at 44 percent, 34 percent and 24 percent respectively. However, economic reforms initiated in the mid-eighties and their execution from early nineties has seen the share of services sector in GDP rising continuously. During 2009-10, the services sector accounted for 57 percent share of the total GDP, followed by industry (29 percent) and agriculture (14 percent).
Source: CSO; Forecasts- RBI (‘12); and World Bank - World Economic Outlook Database, Oct 2010 (‘13-‘15)
Agriculture
Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per cent of the country's gross domestic product (GDP) in 2009-10, and 10.23 per cent (provisional) of the total exports. Furthermore, the sector provided employment to 55 per cent of the work force. The sector grew by 0.03% in FY2010 as compared to FY2009.
The total geographical area of India is 328.7 million hectares of which 140.3 million hectares is net sown area, while 193.7 million hectares is the gross cropped area, according to the Annual Report 2009-10 of the Ministry of Agriculture. India's agriculture and allied sectors grew by 0.03 per cent in the 2009-10, against 1.58 per cent in the previous year on the back of better Kharif crop output. According to the GDP data released by the Central Statistical Organisation (CSO) on November 30, 2010, the country's farm sector grew by 2.5 per cent and 4.4 per cent each in the first two quarters of the current fiscal, against 1.9 per cent and 0.9 per cent, respectively, in the same period last year.
Much of the national economy still disconcertedly depends upon a millennial-old climatic pattern where about 60 percent of irrigation needs are provided by unpredictable monsoon rains which cause fluctuations in the agriculture output. However, it is to be noted is that despite a good monsoon in FY 2010-11, food inflation in India remains remarkably high. RBI officials have been highlighting the persistence of high food inflation in numerous speeches and policy statements and the dilemma posed for conduct of monetary policy. Monetary policy can only control inflation emanating from rising demand but food inflation is largely because of supply side constraints.
Agriculture’s share in output has declined with each passing decade but employment has not decreased with the same pace. This implies income levels within agriculture have not risen in line with the growth in the economy.
The Government is giving highest priority to agriculture and allied sector especially food processing and cold chains. The Eleventh Plan allocation has been considerably higher over the Tenth Plan allocation. An amount of US$ 19 billion has been allocated for the Ministry of Agriculture during the Eleventh Five Year Plan. Currently the food processing industry is considered to be one of the largest industries in the country estimated at US$ 67 billion as of 2009 of the US$ 180 billion food industry.
Besides attracting FDI through schemes like Mega Food Park, the government has also extended several fiscal incentives during this financial year to enhance FDI in food processing sector, including full exemption from excise duty for specified equipments to preserve, store or transport apiary, horticultural, dairy, poultry, aquatic and marine produce and meat and its processing products.
Capital investment in agriculture has increased from US$ 1.2 billion in 2007-08 to US$ 3.26 billion in 2010-11 (inclusive of State Plan Scheme Rashtriya Krishi Vikas Yojana), as per a Ministry of Agriculture press release dated August 3, 2010.
Industry
India has emerged as one of the world's top ten countries in industrial production as per United Nations Industrial Development Organization’s (UNIDO) new report titled 'Yearbook of Industrial Statistics 2010'. India surpassed Canada, Brazil and Mexico in 2009 to reach the 9th position from the 12th position it held in 2008.
The Index of Industrial Production (IIP) quick estimates data for October 2010 shows a growth of 11.3 per cent in the manufacturing sector as compared to October 2009. India ranked second in terms of manufacturing competence, according to report '2010 Global Manufacturing Competitiveness Index', by Deloitte Touche Tohmatsu and the US Council on Competitiveness. The report states that the country's talent pool of scientists, researchers, and engineers, together with its English-speaking workforce and democratic regime make it an attractive destination for manufacturers.
Around 50 segments in the manufacturing sector grew by 39 per cent, entering the 'excellent growth' category, during April-December 2010, according to a survey by the Confederation of Indian Industry (CII) and ASCON. Further, 22 segments made it to the 'high growth' category, registering a growth of 17.3 per cent during the first nine months of the current fiscal. Industries such as utility vehicles, crude oil, power transformers, energy meters, alcoholic beverages and textile machinery have registered around 10-20 per cent growth.
Services
The services sector has been at the forefront of the rapid growth of the Indian economy. As per the Central Statistical Organisation (CSO), Ministry of Statistics and Programme Implementation:
- Trade, hotels, transport and communication grew 9.8 per cent in FY2010 compared to FY2009.
- Financing, insurance, real estate and business services grew at 7.9 per cent in the FY2010
- Community, social & personal services grew by 4.3 per cent during FY2010
Lead indicators suggesting that the pace of expansion in the services sector activity is likely to be sustained include:
- Foreign Tourist Arrivals (FTAs) during January to September 2010 were 3.84 million, an increase of 10 per cent, over 3.49 million over the corresponding period in 2009, as per the Ministry of Tourism data.
- According to the Telecom Regulatory Authority of India (TRAI), the number of telephone subscribers in the country reached 875 million as on May 2011, an increase of 1.53 per cent from 861 million in April 2011. With this the overall tele-density (telephones per 100 people), touched 73.1 at the ends of May 2011. Private operators hold around 88% of the wireless market share where as BSNL and MTNL, are the two PSU operators accounting for the remaining share.
- According to the Indian Ports Association data major ports in India handled 271.29 million tonnes (MT) traffic during April-September 2010-11, as compared to 267.98 MT handled during the same period last year, registering a growth of 1.23 per cent
A brief snapshot of the key service sectors in India is shown in the box below:
