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India’s macroeconomic performance in 2007-08 as measured by growth in real gross domestic product (GDP) was high at 9 per cent. This growth was observed over and above a growth of 9.6 per cent in 2006-07 and 9.4 per cent in 2005-06. With this high growth, the average real GDP growth during the period 2003-2008 worked out to 8.8 per cent, much higher than 5.4 per cent in the preceding quinquennium. Services sector continues to grow at double digit level, 10.7 per cent in 2007- 08. GDP growth originating from ‘Agriculture’ sector in 2007- 08 was 4.5 per cent as against 3.8 per cent recorded in 2006- 07. The acceleration in the agriculture sector may be seen from the increased food grains production in 2007-08 to a record level of 230.7 million tonnes higher than 217.3 million tonnes recorded in 2006-07. Real GDP growth originating from ‘Industry sector’ was lower at 8.1 per cent in 2007-08 than 10.6 per cent observed in 2006-07. The deceleration was mainly on account of decline in manufacturing activities from a growth of 12 per cent in 2006-07 to 8.8 per cent in 2007-08. While there has been a marginal increase in the growth of ‘electricity, gas and water supply’, there has been a decline in the ‘Mining and quarrying’ segment. The deceleration in the GDP originating from ‘industry’ sector was also reflected in the movement of index of industrial production (IIP). The industrial growth, in terms of IIP, moderated to 8.5 per cent during 2007-08 from 11.5 per cent in 2006-07. The manufacturing sector with a weight of 79.4 per cent in the total IIP, recorded a growth rate of 9.0 per cent in 2007-08 much lower than 12.5 per cent observed in 2006-07. In terms of use-based classification, deceleration was observed in all the segments; more so in consumer durables which recorded a negative growth of 1 per cent in 2007-08 as against 9.2 per cent in 2006-07.

The Infrastructure sector which gained momentum during 2006- 07 decelerated significantly during 2007-08. The sector, with a weight of 26.7 per cent in IIP, recorded a growth of 5.6 per cent in 2007-08 as compared with 9.3 per cent during 2006- 07. All the segments of the infrastructure sector, barring coal,

recorded decelerated growth during 2007-08. The micro and small enterprises (MSE) continues to play an important role in India’s industrial growth and exports, besides providing substantial employment opportunities. In the recent years, the MSE sector has consistently registered higher growth in comparison with the overall industrial growth. The MSE sector contributed about 40 per cent to the gross industrial value added in the economy and accounted for 47 per cent of the total manufactured exports.

According to the revised estimates released by the Central Statistical Organization (CSO), real GDP growth originated for the services sector moderated from 11.2 per cent in 2006- 07 to 10.7 per cent in 2007-08 due to deceleration in ‘financing, insurance, real estate and business services’ and ‘construction’ sub-sectors. ‘Financing, insurance, real estate and business services’ recorded a growth of 11.8 per cent in 2007-08 compared to 13.9 per cent in 2006-07. However, the sector’s share in real GDP has marginally increased from 14.3 per cent in 2006-07 to 14.7 per cent in 2007-08. Latest estimates on gross domestic product emanating from sub- sector are available for 2006-07. As per the estimates, banking and insurance constituted 6.68 per cent of real GDP in 2006- 07 as against 6.12 per cent in 2005-06. This sub-sector has recorded a growth of 19.71 per cent in 2006-07. While ‘banking’ showed a growth of 17 per cent, insurance recorded a growth of 34.5 per cent in 2006-07 over 2005-06. The share of insurance sector in real GDP increased to 1.1 per cent in 2006-07 from 0.9 per cent in 2005-06.

Saving and Capital Formation

The CSO released estimates for GDP at the economy level and also at sectoral level for 2007-08. But estimates of saving and capital formation are available with lag of one year; as such, the latest estimates released by CSO relates to 2006- 07. However, the gross financial savings of the household sector, as estimated by Reserve Bank of India (RBI), are available for 2007-08. As such the review pertains to savings and capital formation for 2006-07 and gross financial assets for 2007-08.


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