Indian Economy Under UPA

A . Economy

    India had a booming economy under Atal Bihari Vajpayee-led NDA. The National Democratic Alliance (NDA) regime efficiently overcame economic sanctions imposed due to Pokhran tests and the Kargil war. UPA inherited from NDA an economy with growth oriented policies, reforms and environment, which reaped benefits during the first few years of UPA-I.

Yet, the UPA couldn't capitalise much and extend growth throughout their regime owing to their own economic sins. The misgovernance, maladministration, policy paralysis, decision deficit and galaxy of scams have resulted in jobless growth, declining GDP, increasing current account deficit, rising interest rates, rocketing inflation, mounting external debt and a depreciating rupee, which has resulted in the economic gloom and doom. The United Progressive Alliance’s (UPA) growth story is far from truth and is mere a statistical jugglery. The UPA Govt. has manipulated inflation and GDP Data to show higher growths. Industries , Services and Agriculture the main source of growth for the country has all suffered due to lack of vision,  faulty planning,  procedural and official wrangles and corruption. The Govt. plan to increase non- productive expenditures, social spending (not conducive for promoting human resources to self-reliance) and cheap vote bank (class, religion & caste) appeasement expenses, at the cost of infrastructural, developmental and production increasing expenditures have costed the country dearly. The UPA Govt. has resorted to deficit financing and borrowed heavily from India and abroad to meet these non- productive Expenses (Subsidies, MNREGA, RKVY, MDM, NSAP, Food Security etc. ) and in these expenses there was heavy loot and corruption. In fact the Decade of UPA rule has promoted Economic Crimes and Black Economy. All of these were instrumental in promoting and infusing un-controllable inflation in the Indian Economy and eventual the increase in production cost of goods and services in the country resulting in the slow growth of the economy.  The diversion of Funds allotted for the ambitious NDA plan to link all Major rivers of India has adversely affected agriculture, farm and allied sectors production and Hydro- electricity generation had a catastrophic effect on overall Indian economic growth.

 The reforms process started by the previous NDA govt. was not only stopped but reversed by this UPA govt. The UPA government has failed to employ the natural, human and economic resources of the nation to its potential and has in fact instrumental in wasting and mis-utilising the same by way of corruption, non-performance, under employment and faulty planning and its implementation. Instead of utilizing cheap rain-water for irrigation, farm use, human-use and hydro-electricity generation the central Govt. is guilty of using scarce and expensive petroleum products and coal for the same. This has also resulted in reduction in ground water level and eventually the countries current balance of payment.  The use of renewable recycled natural & human waste as a source for energy and non –conventional energy as solar power, wind energy etc. have been overlooked. Water a source of cheap power and as a catalyst and agent to make organic fertiliser has been totally over-looked. The UPA Govt’s economic policies have discouraged countries self-reliance, independence and sovereignty policy and have forced the nation to be dependent on foreign countries for its needs. The UPA has been instrumental in turning the Indian Economy from production & investment based to consumption dominant economy. The current growth is currently driven by the efforts and entrepreneurship of the people (mainly service industries) and private sectors.

The Indian Gross Domestic Product - GDPs today is US$ 1,972.84 Billion (2013).  In terms of percentage contribution to GDP Agriculture: 16.9%, industry: 17%, services: 66.1% (2013 est. Data CIA fact book).  The Central Statistical Office, CRISIL Research Data for GDP (% y –o-y) FY -12 – 6.2 , FY-13- 5 , FY-14- 4.8. The CIA data of GDP growth on an annual basis adjusted for inflation and expressed as a percent is 3.8% (2013 est.) 3.2% (2012 est.)  6.3% (2011 est.).  India has restored macroeconomic and financial stability, but structural impediments to growth and persistently high inflation remain key concerns, the IMF says in its annual report on the state of the Indian economy. Inflation remains elevated. The report noted that persistently high inflation is a key macroeconomic challenge for India. Over the past several years it has induced double-digit inflation expectations, and given rise to a high demand for gold.  The report also highlighted the need to use headline consumer price index inflation as the principal nominal anchor for monetary policy. “Food and fuel price shocks propagate rapidly into core inflation, and inflation expectations and wage formation are closely linked to CPI inflation. According to the IMF’s assessment, India’s financial system remains well capitalized and supervised, but slowing growth is highlighting corporate vulnerabilities and leading to deteriorating bank asset quality. We've seen in India 10 percent CPI inflation for several years, with inflation expectations even higher than that. So inflation in many ways is reaching its tentacles right throughout the economy and has many consequences. One of which is driving Indians out of saving in financial assets into saving through gold, and of course inflation adversely affects the poor most of all. The economic growth has been driven by the expansion of services that have been growing consistently faster than other sectors.    The World Bank suggests that the most important priorities are public sector reform, infrastructure, agricultural and rural development, removal of labour regulations and reforms in lagging states.

The negative effects of the industrial slowdown in 2013-14 are likely to spill over into services such as trade, transport and banking. The linkages between industries and services have strengthened over time; industry/manufacturing is extending its weak performance to service sector as well. Input –output data suggest that producing one unit of industrial output required 0.44 units of services in 2007-2008. The depreciation of the rupee and slowing growth are also resulting in an increase in the non-performing assets of banks, which are already suffering a decline in profitability on account of rising borrowing cost and mark-to market losses on bond portfolios. Hence the growth of financial services is expected to be lower than expected.  Economic Growth is projected to be further weakened the lowest since 2002-03. Growth/demand slowdown (business risk) emerges as the important vulnerability factor for Indian Companies. The investment climate remains weak the slowdown in demand made worse by lack of affordable credit.

1.      GDP:- IMF Data for GDP Growth 2013 (Constant Prices, National Currency) 5.676 %, GDP (Current Prices,  National Currency) INR 110,701.95 Billion, compared to 2004 GDP Growth (Constant Prices, National Currency) 7.662 %, GDP (Current Prices, National Currency) INR 31,224.40 Billion  US$ 689.028 Billion.

2.      Inflation: - As per RBI data NDA Govt.  in 2003-2004 had recorded an Inflation Overall WPI of 5.5 % with food articles inflation of 1.3 % ( base year 1993-94) which has now increased to 8.9 in 2013-14 with food Inflation increasing to 9.9 % (base year 2004-2005) Ministry of Commerce Data. However this data has been manipulated by base years Index price data and article inclusion and exclusion to show lower inflation and higher GDP growth.  Inflation for 2013 (Average Consumer Price Change %) as per IMF calculations is 10.816 % (base year 2000) compared to 2004 Inflation (Average Consumer Price Change %) 3.767 %.

3.        International Trade and Balance of Payments – IMF data Indicators- Current Account Balance 2013 (US dollars) US$ -97.617 Billion, Current Account Balance (% GDP)         -4.948 % compared to 2004 Current Account Balance (US Dollars) US$ 0.781 Billion, Current Account Balance (% GDP) + 0.113 %.  India's balance of payments on its current account has been negative.  India's exports rose consistently, covering 80.3% of its imports in 2002–03, up from 66.2% in 1990–91.  The then RBI study establishes that the inflows are clearly sustainable. Turning first to the current account, which encompasses the difference between total exports and imports, it is creditable that it has turned into a surplus, thanks mainly to rising exports of goods and invisibles, viz. services. This has happened in spite of the global slowdown and the appreciation of the rupee, which affects both exports of goods and services.

4.      Rupee Devaluation:-  The rupee devaluation along with the Govt.  infused persistent two digit inflation has hit the common man and the Industries hard. The common man’s pocket is being robbed due to this and he has to pull all his ends to maintain his family’s budget. For Companies mark-to-market losses and higher debt servicing costs are likely to be key pressure points in the near term. According to Mr Mukesh Agarwal, President, CRISIL (A standard & Poor Company) Research, “For companies in the CNX Nifty share Index (excluding banking and financial services), around 40 per cent of debt is denominated in foreign currency. In total, corporate India had forex debt outstanding of over $200 billion as of March 2013, of which close to 45 per cent is short-term debt. Moreover, only half their forex exposure is hedged. Persistent weakness in the rupee and heightened volatility has reduced the benefits of borrowing overseas.” From the growth and profitability perspective, sectors that will be negatively impacted by the rupee’s depreciation include automobiles, auto components, airlines, consumer durables, oil marketing companies (OMCs), and fertilisers. The increase in fuel costs will hurt demand for automobiles, especially small cars, as fuel alone accounts for nearly 25-30 per cent of the ownership cost of a small car in the year of purchase. Airlines with a high proportion of revenues accruing from domestic operations will also be hurt as 70 per cent of their operating costs are incurred in dollars.

5.       Under Employment and Unemployment of Human Resources :-  With a total of 18.2% of Indian population in the age group of 15-24 years and  total of 40.4% population under 25-54 years age group,  the  Unemployed youth ages 15-24:  is  10.7%  as per 2012 estimates CIA fact Book .  Official unemployment exceeds 9%. Regulation and other obstacles have discouraged the emergence of formal businesses and jobs. Almost 30% of workers are casual workers who work only when they are able to get jobs and remain unpaid for the rest of the time. Only 10% of the workforce is in regular employment. From the overall stock of an estimated 458 million workers, 394 million (86%) operate in the unorganised sector (of which 63% are self-employed) mostly as informal workers. There is a strong relationship between the quality of employment and social and poverty characteristics. The relative growth of informal employment was more rapid within the organised rather than the unorganised sector. This informalisation is also related to the flexibilisation of employment in the organised sector that is suggested by the increasing use of contract labour by employers in order to benefit from more flexible labour practices. According to the ILO report, it has been argued that India was experiencing 'jobless growth' due to the fact that total employment grew by only 1.1 million from 2004/05 to 2009/10 (based on the National Sample Survey), representing an employment elasticity of almost zero.  India's biggest worry and centre of all debates essentially needs to be the growing informal employment which counts for 94 per cent of the workforce and is growing faster than formal employment," Indian Staffing Federation Vice-President Rituparna Chakraborty said. CRISIL Research, India’s largest independent and integrated research house, in a study estimates incremental non-farm employment will decrease more than 25% to 38 million in FY 2013-19 compared with 52 million seen in FY 2005-12. That’s because fewer jobs are being created with the economy treading a lower-growth path and labour intensity is declining across industry and services. As a consequence, an additional 12 million people will be redirected to the farms in FY 2013-19. During FY 2005-12, there was a decline of 37 million in agriculture employment. Says Dharmakirti Joshi, chief economist, CRISIL: “We expect the Indian economy to expand at slower pace of 6% per year in FY 2013-19 from 8.5% in FY 2005-12. Further, GDP growth is driven increasingly by less labour-intensive services such as financial, real estate and business services (including IT-ITES). For example, in FY 2012, these services, with nearly 19% share in GDP, employed only 3 out of 100 workers in the economy. Employment generation in evolving scenario will therefore pose a severe test for Indian policy makers.”

6.      Under utilization and misuse of Natural resources:  Natural resources are generally defined as all those things given by nature on, above and under the surface of the earth. In this broad sense natural resources include land, water, forests, fisheries and animals, mineral ores and sources of energy like coal, petroleum, gas and uranium, etc. Natural resources of a country influence not only economic growth but also its economic structure. In fact, for the economic development of a country, optimum exploitation of natural resources is more important than their availability. The total cultivable area in India is 1,269,219 km² (56.78% of its total land area), which is shrinking due to population pressures and rapid urbanisation. India has a total water surface area of 360,400 km² and receives an average annual rainfall of 1,100 mm. Irrigation accounts for 92% of the water utilisation, comprising an area of 380 km² in 1974. It is expected to rise to 1,050 km² by 2025, with the balance accounted for by industrial and domestic consumers. India's inland water resources include rivers, canals, ponds and lakes, coupled with the east and west coasts of the Indian ocean and other gulfs and bays. These provide employment to nearly 6 million people in the fisheries sector. In 2008, India had the world's third largest fishing industry. India produces 4 fuels, 11 metallic, 52 non-metallic and 22 minor minerals. India's major mineral resources include Coal (4th largest reserves in the world), Iron ore, Manganese ore (7th largest reserve in the world as in 2013), Mica, Bauxite (5th largest reserve in the world as in 2013), Chromite, Natural gas, Diamonds, Limestone and Thorium (world's largest along Tamil Nadus shores). India's oil reserves, found in Bombay High off the coast of Maharashtra, Gujarat, Rajasthan and in eastern Assam meet 25% of the country's demand Coal,  iron ore, manganese, mica, bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, limestone, arable land

Says Mukesh Agarwal, President, CRISIL Research: “It is desirable to pull more and more people out of agriculture since it is a low-productivity sector, with only a 14% share in GDP, but around 49% share in employment. The old trend of migration from agriculture will reverse with fewer non-farm job opportunities coming in the way of achieving this.” “Apart from GDP growth, India needs to raise the demand for labour, especially in the manufacturing sector, by simplifying labour laws and debottlenecking labour-intensive industries such as textiles, gems and jewellery and leather. Policymakers should also focus on expanding the health, education, construction sectors. This will not only raise India’s growth potential, but also generate a significant number of jobs,’’ added Agarwal.

B . Black market and money or Underground economy: - This UPA Govt. has promoted   “Economic Crimes” such as corruption, tax-evasion and graft, which has resulted into creation of black market or underground economy a market in which money, goods services are traded illegally.  This Govt. has surpassed all corruption records and has robbed or caused to rob the nation of its natural, mineral, scientific and human resources.  The key distinction of a black market trade is that the transaction itself is illegal. The goods or services may or may not themselves be illegal to own, or to trade through other, legal channels. Because the transactions are illegal, the market itself is forced to operate outside the formal economy, supported by the established state power. Money itself is traded on the black market i.e. the currency is counterfeit. The currency has been acquired illegally and needs to be laundered before the money can be used. Economic crimes cause significant damage to the general economy of the country, adversely affecting the growth and development of the nation. Internationally it erodes confidence in the financial credibility and stability of the nation, thus weakening its global competitiveness and further, becoming unattractive to investments from within as well as outside. Where there is a high incidence level of economic crime, the government and bureaucracy are also viewed as being corrupt and weak. The major impacts  that the economic crimes has created on the  Indian economy is that it has caused :  Increase in inflationary pressure, Uneven distribution of resources and creation of elitism, Marginalisation of tax base, Generation of abundant black money, Creation of parallel economy, Undermining of developmental works/efforts, Becomes a breeding ground for corruption, Illicit businesses thrive affecting licit business, Resources of financial and commercial institutions are diverted and distorted,  Weakens morale and commitment of citizens, Poor/weakest continue to be at risk,  Countries economic equilibrium is at stake. The black money market situation in India is epidemic. India currently tops the list for illegal monies in the entire world, estimated to be almost ₹ 90,54,136 Crores  stored in Swiss banks in the form of unaccounted money as per the  data provided by the Swiss Banking Association.  India has more black money than the rest of the world combined.

 C. Infrastructure: -   Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise or the services and facilities necessary for an economy to function. It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development. It is an important term for judging a country's development. The term typically refers to the technical structures that support a society, such as roads, bridges, means of transportation, ports, water supply, sewers, electricity, telecommunications, and so forth, and can be defined as "the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions." Viewed functionally, infrastructure facilitates the production of goods and services, and also the distribution of finished products to markets, as well as basic social services such as schools and hospitals; for example, roads enable the transport of raw materials to a factory.  In the World Economic Forum’s Global Competitiveness Report for 2011-2012, India ranked 89th out of 142 countries for its infrastructure. The report criticized its transport, ICT and energy infrastructure as “largely insufficient and ill adapted to the needs of business,” adding: “The Indian business community continues to cite infrastructure as the single biggest hindrance to doing business in the country.”  Global trade is placing acute pressure on India’s inefficient ports. Rapid industrialization is intensifying the strain on the nation’s unreliable networks for electricity and water. The railway system — already infamously overcrowded — faces rising demand for freight capacity. And the government has fallen far short of its plans to build 20 km of roads each day — an urgent requirement in a nation where 65% of all freight is transported by road, and where traffic is so severe that the maximum highway speed for trucks and buses is only 30-40 km per hour. The Government of India has been consistently increasing its spending on the development of infrastructure capabilities to attain sustainable economic growth. The nation's infrastructure spending is expected to grow to 9.9 per cent of gross domestic product (GDP) during the 12th Five-Year Plan from 7.5 per cent during the 11th plan. However corruption and lack of political will to enforce reforms and economic development on time has forced the projects worth 17 lakhs Crores delayed and uncompleted in this UPA Govt.  The UPA Government on July 1, 2013 accepted before Supreme Court that NDA National Democratic Alliance Government lead by Vajpayee has developed half the roads in last 32 years in their 5 year term. The 12th plan emphasises on the need for expanding infrastructure and increasing investments by the government, private and forms of public-private partnerships. The growth rate of Indian real estate has been at par with the growth in population, but, still a house remains a dream for about 78 millions.

·         Power Sector:- The power sector consists of generation, transmission and distribution utilities and is a crucial component of India's infrastructure.  As per Wikipedia, the electricity sector in India had an installed capacity of 233.929 GW as of December 2013, the world's fourth largest. Captive power plants generate an additional 34.444 GW. Non Renewable Power Plants constitute 87.55% of the installed capacity, and Renewable Power Plants constitute the remaining 12.45% of total installed Capacity. India generated around 911 BU (911,652 MU i.e. 911 TWh) of electricity. (excluding electricity generated from renewable and captive power plants) during the 2012–13 fiscal. The total annual generation of electricity from all types of sources was 1053.9 TeraWatt-hours (TWh) in 2012. In terms of fuel, coal-fired plants account for 59% of India's installed electricity capacity. After coal, renewable hydropower accounts for 17%, renewable energy for 12% and natural gas for about 9%. In December 2011, over 300 million Indian citizens had no access to frequent electricity. Over one third of India's rural population lacked electricity, as did 6% of the urban population. Of those who did have access to electricity in India, the supply was intermittent and unreliable. In 2010, blackouts and power shedding interrupted irrigation and manufacturing across the country. States such as Gujarat, Madhya Pradesh and others provide continuous power supply. The per capita average annual domestic electricity consumption in India in 2009 was 96 kWh in rural areas and 288 kWh in urban areas for those with access to electricity, in contrast to the worldwide per capita annual average of 2600 kWh and 6200 kWh in the European Union. India's total domestic, agricultural and industrial per capita energy consumption estimate vary depending on the source. Two sources place it between 400 to 700 kWh in 2008–2009. As of January 2012, one report found the per capita total consumption in India to be 778 kWh. India currently suffers from a major shortage of electricity generation capacity, even though it is the world's fourth largest energy consumer. India's network technical losses is 23.65% in 2013,compared to world average of less than 15%. The growth of the economy is expected to boost electricity demand in coming years. Ensuring availability of fuel quantities and qualities, lack of initiative to develop large coal and natural gas resources present in India, new project management and execution, environmental issues and the lack of funds for investing into new projects have been responsible for low electricity generation and holding up the expansion plans in the power sector even as the demand has steadily been growing. SENIOR officials point out that while the government is pinning high hopes on the private sector to meet a significant portion of the $ 1 trillion investment required to give a fillip to the country's sluggish infrastructure, the power sector seems to be in the doldrums at this point.

·         The Indian Oil and Gas Sector: - The oil and gas sector in India is a critical component of the country’s economy, accounting for 15 per cent of the country’s gross domestic product (GDP). Economic growth is directly linked with energy demand, and a conservative estimate of 7 per cent growth is expected to double India’s per capita energy consumption from 560 kilograms of oil equivalent (kgoe) in FY10 to 1,124 kilograms of oil equivalent (kgoe) by FY32.4 .  As oil and gas is one of the main sources to meet the required demand for energy in India, its demand is forecast to rise further. In 2011,natural gas accounted for 10 per cent of the country’s total energy requirements, whereas estimates suggest that this figure will reach 20 per cent by 2025, with oil and gas together accounting for approximately 45 per cent of the total demand. Market reports estimate that this growth is expected to take the size of the Indian gas market to that of the gas market in Japan, the largest consumer of liquefied natural gas (LNG) in Asia, by the end of 2015. Despite having significant reserves in India, the increase in demand is expected to be primarily met through imports. India had about 5.6 billion barrels (890,000,000 m3) of proven oil reserves as of January 2007, which is the second-largest amount in the Asia-Pacific region behind China. The combination of rising oil consumption and fairly unwavering production levels leaves India highly dependent on imports to meet the consumption needs. The Energy Information Administration (EIA) estimates that India registered oil demand growth of 100,000 bbl/d (16,000 m3/d) during 2006. As per the Oil and Gas Journal, India had 38 trillion cubic feet (1.1×1012 m3) of confirmed natural gas reserves as of January 2007. A huge mass of India’s natural gas production comes from the western offshore regions, particularly the Mumbai High complex. The onshore fields in Assam, Andhra Pradesh, and Gujarat states are also major producers of natural gas. As per EIA data, India produced 996 billion cubic feet (2.82×1010 m3) of natural gas in 2004. India imports small amounts of natural gas. In 2004, India consumed about 1,089×109 cu ft (3.08×1010 m3) of natural gas, the first year in which the country showed net natural gas imports. During 2004, India imported 93×109 cu ft (2.6×109 m3) of liquefied natural gas (LNG) from Qatar.

  D. Agriculture: -- India holds the second largest agricultural land (179.9 million hectares) in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India.  The country also possesses 46 of the 60 soil types in the world. India ranks second worldwide in farm output. However, international comparisons reveal the average yield in India is generally 30% to 50% of the highest average yield in the world.  To feed the Indian population (2014) of 126 Crores it needs heavy production of Agri-foods and grains. India roughly represents 18% of the total world populace. It means that every 1 out of 6 people live in India. However Indian agriculture is marred by non- foresight and  faulty planning, where raw food grains and farm products are exported instead of processed and value added products un-like USA which does just the reverse. This has led to under nutrition, malnutrition and hunger to its own citizens and high food articles inflation in the country. India is among the 10 leading exporters of agricultural products in the world; the country accounted for 2.07 percent of global agricultural trade in 2012. Agriculture and allied sectors like forestry and fisheries accounted for 16.6% of the GDP in 2009, about 50% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Improvement in yield, which is the key to the long-term growth, depends on efficient use of quality seeds, fertilizers, pesticides, micronutrients, and irrigation. Each of these plays a role in determining yield level and in turn augmentation in level of production.  Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 2003–04, which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth.  There can be no Green Revolution without adequate irrigation and fertilizer, which is consistently deteriorating due to the faulty policies of the Government. India receives an average annual rainfall of 1,208 millimetres (47.6 in) and a total annual precipitation of 4000 billion cubic metres, with the total utilisable water resources, including surface and groundwater, amounting to 1123 billion cubic metres with Total utilizable ground water resources  433 BCM . 546,820 square kilometres (211,130 sq mi) of the land area, or about 39% of the total cultivated area, is irrigated. The balance of water runs down through the rivers to the Ocean hence under utilisation of precious natural resource. Current agricultural practices are neither economically nor environmentally sustainable and India's yields for many agricultural commodities are low. Poorly maintained irrigation systems and almost universal lack of good extension services are among the factors responsible. Farmers' access to markets is hampered by poor roads, rudimentary market infrastructure, and excessive regulation."World Bank: "India Country Overview 2008.  Total exports of Indian agri and processed food products from April to August 2013 stood at US$ 9,711.09 million as compared to US$ 8,806.41 million during the same period last year, according to the data released by the Agricultural and Processed Food Products Export Development Authority (APEDA).  India has emerged as a major player in the global agriculture market. In the last five years, the country’s agriculture exports have tripled from around Rs 80,000 crore (US$ 12.75 billion) to Rs 2.32 trillion (US$ 33.99 billion). India is principally an agricultural country. Agriculture, with its allied sectors, is unquestionably the largest livelihood provider in India. Most of the industries also depend upon the sector for their raw materials. Steady investments in technology development, irrigation infrastructure, emphasis on modern agricultural practices and provision of agricultural credit and subsidies are the major factors contributed to agriculture growth. Indian agriculture has undergone rapid transformation in the past two decades. The policy of globalisation and liberalisation has opened up new avenues for agricultural modernisation. This has not only lead to commercialisation and diversification, but also triggered various technological and institutional innovations owing to investments from corporate entities.

E. Industrial Growth

Industry accounts for 26% of GDP and employs 22% of the total workforce. India is 11th in the world in terms of nominal factory output according to data compiled through CIA World Factbook figures. The CRSIL data of GDP Share of Industries (y-o-y%) shows a consistent  decline from FY -13-2.1 to FY-14- 1%.  The growth of Industries is the story of growth (where input output ratio is high ) is the story of  growth for most of the developed nations in the world.  Textile manufacturing is the 2nd largest source of employment after agriculture and accounts for 20% of manufacturing output, providing employment to over 2 Crores people. The previous NDA Govt.   had started  the transformation of the textile industry from a declining to a rapidly developing one , after freeing the industry from a number of limitations, primarily financial and  gave a green light to massive investment inflows – both domestic and foreign. However, demand for Indian textiles in world markets continues to fall due to policy negligence of the govt.  According to the official Economic Survey for 2012-13, the moderation in growth is primarily attributed to weakness in industry which has registered a growth rate of 3.5 per cent and 3.1 per cent in 2011-12 and 2012-13, respectively. This has come down even further during the current fiscal with the manufacturing sector contracting as investment has declined due to the uncertainty created by a government weakened by a spate of scams. While the government has been claiming that it is expediting project clearances through the Cabinet Committee on Investment (CCI) headed by the Prime Minister, official numbers tell a different story.  Figures compiled by the Ministry of Statistics and Programme Implementation (MOSPI) reveal that as many as 301 central sector projects, each involving an investment of more than Rs.150 crore, have been delayed resulting in cost overruns to the tune of a whopping Rs.1.74 lakh crore. The original cost of 738 big projects being monitored by the MOSPI was Rs.9.05 lakh crore. The anticipated cost of these projects has now risen to Rs.10.79 lakh crore due to inflation. Apart from this massive investment not being made available to rev up the economy and create jobs, the cost of implementing these projects has shot up due to inflation. The Indian private sector was faced with increasing domestic as well as foreign competition, including the threat of cheaper Chinese imports.

F. Service Sector: - Services are the major source of economic growth, accounting for nearly two-thirds of India's output, with less than one-third ( 27% ) of its labor force. India has capitalized on its large educated English-speaking population to become a major exporter of information technology services and software workers.  The services sector covers a wide array of activities ranging from services provided by the most sophisticated sectors like telecommunications, satellite mapping, and computer software to simple services like those performed by the barber, the carpenter, and the plumber; highly capital-intensive activities like civil aviation and shipping to employment-oriented activities like tourism, real estate, and housing; infrastructure-related activities like railways, roadways, and ports to social sector related activities like health and education. The National Accounts classification of the services sector incorporates trade, hotels, and restaurants; transport, storage, and communication; financing, insurance, real estate, and business services; and community, social, and personal services. In the World Trade Organization (WTO) list of services and the Reserve Bank of India (RBI) classification, construction is also included. Among the top 15 countries with highest overall GDP in 2011, India ranked 9th in overall GDP and 10th in services GDP. A comparison of the services performance of the top 15 countries in the eleven-year period from 2001 to 2011 shows that the increase in share of services in GDP is the highest for India (8.1 percentage points).   India’s services sector has emerged as a prominent sector in terms of its contribution to national and states incomes, trade flows, FDI inflows, and employment.  The growth story overall and services of world and India in the 2000s began from almost the same level of around 4-5 per cent in 2000. But over the years, India’s overall and services growth rates have outpaced those of the world. Interestingly, unlike world services growth, which has been moving in tandem with its overall growth with mild see-saw movements over the years, India’s services growth has been consistently above its overall growth in the last decade except for 2003 (when the former was marginally lower than the latter). Thus, for more than a decade, this sector has been pulling up the growth of the Indian economy with a great amount of stability. The share of services in India’s GDP at factor cost (at current prices) increased from 33.3 per cent in 1950-1 to 56.5 per cent in 2012-13 as per Advance Estimates (AE). Including construction, the share would increase to 64.8 per cent in 2012-13. With an 18.0 per cent share, trade, hotels, and restaurants as a group is the largest contributor to GDP among the various services sub-sectors, followed by financing, insurance, real estate, and business services with a 16.6 per cent share. Both these services showed perceptible improvement in their shares over the years. Community, social, and personal services with a share of 14.0 per cent is in third place. Construction, a borderline services inclusion, is at fourth place with an 8.2 per cent share.

  The services sector has been a key force driving growth in the Indian economy for more than a decade. The economy has successfully managed to pass through the turbulent years of the recent global economic crisis primarily due to the vitality of this sector in the domestic economy and its prominent role in India's external economic interactions. The services sector in India comprises a wide range of activities from the most sophisticated information technology (IT) to simple and basic services provided by the unorganised sector, such as the services of the barber and plumber. Information technology and business process outsourcing are among the fastest growing sectors, having a cumulative growth rate of revenue 33.6% between 1997 and 1998 and 2002–03 and contributing to 25% of the country's total exports in 2007–08. India's IT industry, despite contributing significantly to its balance of payments, accounts for only about 1% of the total GDP or 1/50th of the total services.  The Indian IT services industry is expected to reach US$ 100 billion in revenues in 2012, with exports contributing to about US$ 69 billion. The industry contributes to India's GDP by around 7.5 per cent and employs close to 2.8 million employees, with an additional 2,30,000 employees expected to be added in fiscal 2012. The indirect employment created in the economy is expected to be four to five times that of the direct employment generated. Taken together, the IT services industry in India is one of the biggest employment creators in the country and has put the country on the global map.

Retail Trade: Retail industry is one of the pillars of Indian economy and accounts for 14–15% of its GDP. The Indian retail market is estimated to be US$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail market in the world. India's retailing industry essentially consists of the local mom and pop store, owner manned general stores, convenience stores, hand cart and pavement vendors, etc.  It is estimated that there are around India's retail organized industry, employs directly about 4 Crores  people with around 1.3 lakhs  retails organized outlets in India. If we include the unorganized sector and the employees of organized sector and their dependents this figure will sour to above 30 Crores peoples.  Organised retail supermarkets account for 4% of the market as of 2008.   In 2012 government permitted 51% FDI in multi brand retail and 100% FDI in single brand retail putting the life’s of Indian retail traders at stake.  Economist Mohan Guruswamy of the Centre for Policy Alternatives warns that FDI companies like Wal-Mart, Tesco and Carrefour will serve only to elite Indians. The average Wal-Mart store will displace 11,200 people and replace them with 285 people. Small Traders will be routed out of trade and will be unemployed.