New Delhi: The Index of Industrial Production grew at only 2.4% in the year ended 31 March, compared with 8.5% in the preceding year, the Economic Survey 2009 said.
“The industrial sector witnessed a sharp slowdown during 2008-09 as a consequence of successive shocks, the most important being the knock-on effects of the global financial crisis,” the survey said. “The pace of slowdown accelerated in the second half of 2008-09 with the sudden worsening of the international financial situation and the global economic outlook.”
Growth in mining, manufacturing and electricity generation slumped to 2.3%, 2.3% and 2.8% in 2008-09, from 5.1%, 9% and 6.4%, respectively, in the previous financial year.
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However, “there were positive signs that the Indian industry may have weathered the most severe part of the shock and is now moving towards a recovery,” the survey said.
Some of the positive signs, it said, are the recent upturn in power generation, improvement in cement despatches and rise in bank credit. The sustained inflow of foreign direct investments (FDI) also points to foreign investor confidence in the Indian economy, especially Indian industry, the survey said.
The period between January 2006 and July 2008 saw persistent increases in the price of crude oil.
The price rise in other commodities, particularly metals and ores, from the second half of 2006-07 to the second half of 2008-09, also had its effect on the cost side of the manufacturing sector, it added.
Cost due to consumption of raw materials rose by as much as 38% and 44% in the first two quarters of 2008-09, compared with 16% and 12%, respectively, during the same quarters of the previous year.
Beverages and tobacco, and machinery and equipment posted the best annual growth figures at 15.6% and 8.7%, respectively.
Wood products, jute textiles, food products, leather products and metal products posted the worst growth rates, showing declines of between 10.3% and 4%.
In the farm sector, which provides livelihood to around 60% of the country’s population, growth fell to 1.6% in 2008-09, compared with nearly 5% growth in the year ended 31 March 2008.
The fall in production of non-food crops, such as oil seeds, cotton, sugar cane and jute, contributed to the reduced growth.
The survey was concerned over declining investments in the agriculture sector.
The survey suggested doing away with the ban on futures trading on rice, sugar and lentils.
India’s food subsidy bill increased from Rs31,260 crore to Rs43,668 crore on selling rice and wheat below cost to poor families.
“In 2008-09, most kharif crops except paddy were bad. Oilseeds, maize, sugar cane and pulses saw fall in production. Because of expectation of a deficient rainfall, agricultural growth is expected to fall in 2009-10 also although it is a little early to say that,” said S. Raghuraman, head of trade research at Agriwatch, a Delhi-based research outfit in agri-commodities.
Utpal Bhaskar contributed to this story.