Economic Survey: Power, coal, cement propelled growth, manufacturing disappoints

Finance Minister Arun Jaitley today presented the Economic Survey in the Lok Sabha which noted the recovery in the current fiscal was led by the infrastructure sectors namely electricity, coal and cement.

According to the latest Index of Industrial production (IIP) industrial sector is recovering slowly at 2.1 percent during April-December of this fiscal, just over 0.1 percent in the corresponding period last year.

During this period mining sector growth turned positive but manufacturing remained tepid recording just 1.2 percent in April-December. The Economic Survey said that a subdued manufacturing was mainly due to high rate of interest, infrastructure bottlenecks and low domestic and external demand.

Based on the new methodology with 2011-12 as a base year, the Economic Survey pointed out that the latest Gross Domestic Products estimates signalled towards industrial recovery which is in contrast to earlier perception about slow industrial growth during the last three years.

The Survey lauded the government’s efforts for easing environment of doing business, skill development initiatives and for efforts like in India and Digital India. It also praised the government for creating National Industrial Corridors Authority enabling streamlining of environment and forest clearances and labour reforms.

The seriousness of the government in its pro-development agenda gathered appreciation from the Survey as steps like issuing of ordinances to remove land acquisition bottlenecks, e-auction of coal blocks for private companies and auction of iron ore and other new coal mines. The government’s intent to resolve long pending issues like gas pricing, fixing coal blocks auction norms and improving power distribution network also came in for praise in the Survey.

According to the Survey, the overall growth in the eight core industries improved marginally to 4.4 percent compared to 4.1 percent in the same period last year.

Electricity, coal and cement stood out as the driving forces but areas like natural gas, fertilisers, crude oil, refinery products and steel slowed down the pace of growth. Thanks to Coal India, thermal power was generated at a higher volume because of increased coal production by the public sector firm.

Natural gas and crude oil production did little to help growth as no major oil wells could be discovered between April-December last year. Insufficient gas supply also affected the fertiliser sector. On the other hand, cheaper imports harmed the domestic steel sector, the Economic Survey said.

The pre-budget Economic Survey said that 3.61 crore MSMEs contributed 37.5 percent of the country’s GDP playing an important role in boosting industrial growth and propelling the Make in India programme.

Investor-friendly FDI policy permitting FDI upto 100 percent in select sectors through the automatic route helped the growth story favourably. FDI upto 100 percent through automatic route is now allowed in construction, operation and maintenance of identified railways transport infrastructure. Norms related to minimum land area, capitalization and repatriation of funds for FDI in construction, development projects have also been liberalized. The Economic Survey said that during April-November, total FDI inflows (including equity inflow, reinvested earnings, and other capital) were $27.4 billion, while FDI equity inflows were $18.9 billion.

In the power sector, the Economic Survey said that the government has taken several decisions to provide 24X7 power across the country by 2019 which includes steps for increasing power generation, strengthening of transmission and distribution, separation of feeder and metering of power to consumers. Two new schemes have been launched namely Integrated Power Development Schemes and Deendayal Upadhyaya Gram Jyoti Yojana ti improve distribution. The Electricity (Amendment) Bill 2014 was also introduced in Lok Sabha.

Renewable energy got a big thrust with two new schemes — Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects and Pilot-cum-Demonstration Projects for Development of Grid Connected Solar PV Power plants on Canal Banks and Canal Tops — were rolled out in December last year, the Economic Survey said.

On railways, the Economic Survey listed out key focus areas which include creation of capacity, modernisation of network, improvement in asset utilisation and productivity, modernisation of rolling stock and maintenance practices and improvement in the quality of services. Investments are being prioritized in important areas like Dedicated Freight Corridors (DFCs), high speed rail, high capacity rolling stock, last mile rail linkages, and port connectivity, the Survey said.

In the road sector, efforts have been undertaken to resolve problems associated with projects which are yet to be completed and the setting up of National Highways and Infrastructure Development Corporation Ltd. for speedy implementation of highway projects in the North East.

The Survey said that the civil aviation sector saw a healthy increase in international passengers and cargo handled at Indian airports during 2014-15. The major initiatives are implementation of PPP projects at four airports of the AAI, setting up of greenfield airports and development of small airports in Tier II and Tier III cities.

The Economic Survey also praised Swachh Bharat Mission, Heritage City Development and Augmentation Yojana and Smart City Scheme have been announced for development of urban infrastructure.