Overview of the EconomyiiiA brief review of the economic situation duringfirst three quarters and prospects for next quarteris given below:
Real GDP Sectoral Growth:
The Real GDPgrowth is estimated to remain at around 2.4percent compared to the target of 4.5 percent. Theset back was due to the agriculture sector whichwas badly affected by floods. However, the strongperformance of services sector which grew at 4.1percent has kept the overall growth in areasonable range. The sector-wise estimates arediscussed in subsequent paragraphs:Agriculture sector recorded modest growth of 1.2percent in 2010-11 against the target of 3.8percent but provided much needed support toboost exports, revival of manufacturing sector andresponsible for upbeat in the consumption. Giventhe enormous price inducement, the agriculturesector is likely to spearhead economic growth inthe next fiscal year as well. The lower growthowing to recent floods necessitated downwardadjustments in the estimates of some of majorcrops like rice, and cotton. The rice cropproduction unexpectedly went down to 4.8 milliontons which will be lowest ever production since1994-95. The wheat production stood at 24.2million tons as against last year’s actualproduction of 23.8 million tons. The importantthing is better yield as area under cultivation fellby around 3 percent. Sugarcane is estimated at 55million tons which will be highest in the last threeyears. Minor crops are estimated at 4.1 percentmainly because of enormous price incentiveavailable and its shock resistant nature. Theestimate for growth in the livestock sector is 3.7percent as against 4.2 percent last year. Lowergrowth is because of the adverse impact of devastating flood destroying some of thelivestock. However, recent surge in prices of livestock products and incentives provided forlivestock may help in improving the valueaddition in the sector in the medium-term. Withchanging patterns of consumption, theconsumption of livestock products has increasedsignificantly. There are indications that priceincentive might work for more livestock growth.The
declined by 11.3 percent,thereby representing less usage by the farmers.One reason might be higher prices as urea pricessoared by 25.8 percent and DAP is expensive by46.5 percent in the first nine months of the currentfiscal year. Domestic production is up by 2.7percent but import of fertilizer is down by 50.4percent.
Disbursement of credit for agriculture sector
hasincreased marginally by 1.4 percent in July-March2010-11. This fall in disbursements is largely dueto substantial decline of 23.7 percent seen in onespecialized bank (ZTBL) which more than offsetthe 9.5 percent rise in disbursements made bycommercial banks. The sluggish creditperformance is partially contributed by risk-aversebehavior of commercial banks and weaker activityin the aftermath of floods.
remained victim of power outages and lower domestic demand.Slowdown in large-scale manufacturing fromearlier projected 4.9 percent to 1.7 percent (July-March 2010-11) reflects the impact of the severityof energy shortages and electricity tariff -hikeleading to cost escalation. The positive terms of trade shock has helped improve competitivenessfor textile sector in particular and otherconventional exports based small and mediummanufacturing sectors. We expect it to pick-up inmonths to come and improve growth performancefurther mainly because of capacity enhancementin some industries like fertilizer, and steel, andlikely improvement in the sugar production to 4.1million tons this year. The impact of thesepositive developments will feed into the growthduring the period January-June 2011. Notably, thebase effect will work adversely up to March 2011,and thereafter it may support growth momentum.
As noted earlier Inflation hasreared its head in the first half of the year andposed a challenge for economic management.Two price indices like CPI and SPI witnessed aclear downtrend in recent months; however, WPIremained on upward trajectory. The inflation rateas measured by the changes in Consumer PriceIndex (CPI) after reaching peak at 25.3 percent inAugust 2008, showing easing since November2008 with slight variations. However, followingmassive supply disruptions in the aftermath of devastating floods, food inflation became sole