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February 24, 1999


Highlights of the Economic Survey 1998-1999

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  • The GDP growth rate, which slowed down significantly to 5.0 per cent in 1997-98 from 7.8 per cent in 1996-97, recovered to an estimated 5.8 per cent in 1998-99.

  • The recovery in 1998-99 was led by the rebound in agriculture and allied sectors, which is projected to grow by 5.3 per cent.

  • Total gross domestic savings declined to 23.1 per cent of the GDP in 1997-98 from 24.4 per cent in 1996-97.

  • Real gross domestic capital formation dropped marginally from 26 per cent of the GDP (constant price) in 1996-97 to 25.6 per cent in 1997-98.

  • The 1998-99 food-grain output is expected to be about 195.3 million tonnes.

  • As measured by the Index of Industrial Production, industrial growth for April-December 1998 was 3.5 per cent, down from 6.7 per cent in April-December 1997.

  • While growth in basic goods slowed from 6.8 per cent in April-December 1997 to 1.4 per cent in April-December 1998, the 9.8 per cent growth in capital goods for April-December 1998 was significantly higher than the 6.7 per cent recorded in the corresponding period of 1997.

  • The import of capital goods (machine tools, mechanical and electrical machinery, transport equipment and project goods) in US dollar terms increased substantially in April-November 1998. The growth rate of 7 per cent represents a large turnaround from the 16.6 per cent fall in the corresponding period of 1997-98.

  • Growth in infrastructure in April-December 1998 declined as compared to the corresponding period of 1997.

  • The annual rate of inflation in the Wholesale Price Index rose in 1998-99 to a peak of 8.8 per cent on September 26. It decelerated thereafter to 4.6 per cent (provisional) on January 30, 1999.

  • Despite the steep, though temporary, flare-up in the overall inflation rate in 1998-99, the underlying inflation rate remained modest.

  • The year-on-year monetary (M3) growth at 19.8 per cent as of January 15, 1999, exceeded the growth in 1997-98 by 2.9 percentage points.

  • The total flow of funds comprising non-food credit and investment in debt/equity instruments expanded 9.7 per cent till January 15, 1999, as against 11.5 per cent in the corresponding period of 1997-98.

  • The central government's finances in the current year continued to be under stress.

  • There was a slow but steady improvement in the performance of public-sector banks.

  • Sanctions and disbursements by all-India financial institutions continued their strong growth in 1998-99. In April-December 1998, sanctions grew 36.9 per cent and disbursements 12.5 per cent.

  • Capital markets remained subdued for most of the year. The bulk of the capital raised (nearly 80 per cent) was in the form of bonds.

  • The current account deficit widened to 1.6 per cent of GDP or US$6.5 billion in 1997-98. In 1998-99, it is estimated to fall, as a percentage of the gross domestic product, below the 1997-98 level.

  • The trade deficit, on a BoP (balance of payments) basis, increased from 3.7 per cent of the GDP in 1996-97 to 3.9 per cent in 1997-98. The increase of 15.7 per cent in non-POL imports over the same period is mainly the result of a shift in imports of gold and silver from the baggage channel to the DGCI&S channel.

  • Total imports, on BoP basis, increased by only 4.4 per cent to $51.1 billion in 1997-98 compared to the 12.1 per cent growth recorded in 1996-97. There was further deceleration of imports.

  • The capital account in the balance of payments, which showed an impressive surplus of $10.4 billion in 1997-98, is likely to be lower in 1998-99. Total net capital inflows in 1998-99 are expected to be substantially lower than in 1997-98, if the exceptional inflows of $4.2 billion under the Resurgent India Bonds are excluded.

  • Foreign direct investment, which increased 18.6 per cent in 1997-98, fell 38 per cent in April-December 1998. Portfolio investment continued to decline from $3.3 billion in 1996-97 to $1.8 billion in 1997-98, to an outflow of $0.7 billion in April-December 1998. This was partly the result of contagion from the East Asian crisis.

  • Gross disbursements in April-September 1998 were lower at $830 million compared to $1,066 million in the same period in 1997. External commercial borrowing approvals up to December 23, 1998, are placed at $3.8 billion compared to $8.7 billion in 1997-98.

  • Disbursements fell more sharply from $4 billion in April-September 1997-98 to $1.6 billion in the first half of 1998-99. This was due to the relative unattractiveness of ECBs.

  • The total foreign exchange reserves (including gold and SDRs) at the end of January 1999 amounted to $30.4 billion, providing cover for about seven months of imports.

  • The exchange rate of the rupee vis-a-vis the dollar is Rs42.50. The movements in the exchange rate helped to correct the relative appreciation of the rupee in real terms.

  • India's stock of external debt at the end of September 1998 stood at $95.2 billion as against $93.9 billion at the end of March 1998. The debt service payments as a ratio of current receipts continued to improve, declining from 30.2 per cent in 1991-92 to 19.5 per cent in 1997-98. The share of short-term debt to total debt declined from 7.2 per cent at the end of March 1997 to 5.4 per cent at the end of the same month in 1998 and 3.7 per cent at the end of September 1998. The share of concessional debt declined from 44.7 per cent in 1996 to 39.3 per cent at the end of March 1998 and 37.7 per cent at the end of September.

  • Expenditure on anti-poverty measures as a ratio of GDP at market prices increased to a record high of 1.91 per cent in 1998-99 as compared to 1.33 per cent in 1991-92 and 1.75 per cent in 1997-98.

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