The Economic Survey 2006-07 has lauded the impressive growth of the industrial sector, propelled by robust growth in the manufacturing sector, which has continued unabated during the current year so far.
Finance Minsiter P Chidambaram presented the Economic Survey in the Lok Sabha on Tuesday.
Year-on-Year, the industrial growth of 10.6 per cent in the first nine months of 2006-07 was the highest recorded since 1995-96. In seven of the eight months of the current year, the Year-on-Year growth of the manufacturing sector was in the double digits.
The Survey feels that the lower contribution of industry to GDP growth relative to services in recent years is partly because of its lower share in GDP, and does not adequately capture the signs of industrial resurgence. The growth of industrial sector, from a low of 2.7 per cent in 2001-02 revived to 7.1 per cent and 7.4 per cent in 2002-03 and 2003-04 respectively, and after accelerating to over 9.5 per cent in the next two years, touched 10.0 per cent in 2006-07. Since 1951-52, industry has never consistently grown at over seven per cent per year for more than three years in a row before 2004-05.
According to the Survey, the industrial growth would have been even higher, had it not been for a relatively disappointing performance of the two sub sectors, namely, mining and quarrying; and electricity, gas and water supply.
The continuing broad based growth in the services sector, especially the three sub-sectors of services, trade, hotels, transport and communication services, has continued to boost the sector by growing at double digit rates for the fourth successive year. Impressive progress in Information Technology (IT) enabled services has also given a boost to the sector.
The expected overall annual growth of industry in the Tenth Plan period (2002-2007) at around 8.7 per cent is short of the targeted growth rate of 10 per cent for the Plan period. Given the recent performance, however, the Eleventh Plan (2007-2012) target of 10 per cent annual industrial growth appears achievable. As the country enters into the first year of the Eleventh Plan, the sustained growth of the industrial sector is crucially dependent on removing the infrastructural impediments, especially, in the power sector.
Capacity additions through investment is critical for accelerating growth in industry. The investment scenario looks quite optimistic , particularly with rising domestic savings rates and FDI inflows. Sustained economic growth, fiscal consolidation and an enabling policy environment will continue to provide incentive to capacity addition in industry and sustaining its high growth.
Adequate expansion of employment in the industrial sector, particularly in the organised segment, requires attention. The formation of appropriate skills through a wide variety of vocational training as well as optimal degree of flexibility of labour laws are important aspects in this regard. Progress on these fronts will determine how much progress is made in generating employment in the organised industry in the years to come.