The industry & services sector were both expected to show a strong recovery and is performing along the expected lines. The mining sector is presenting a strong output expansion similar to its performance in June and July 2009 but the growth in the output of crude oil and coal has shown a marked decrease. Hence, despite the large increase in the production of natural gas, iron ore and some other minerals, overall expansion of the mining sector has remained at less than 10 per cent in Q3 and third quarter and is expected to do so in the last quarter as well. Similar is the case with electricity generation which has shown a growth of only 4.5% in Q3 compared to 10% and 8% respectively in the months of August and September, 2009.It is expected that electricity generation growth will remain around 6 per cent in the final quarter of the current fiscal. This shortfall is in part due to lower hydel power generation, a consequence of the poor monsoons and the low level of reservoir capacity, as well as due to under performance of thermal power plants due to inadequate coal production and delayed imports.
Prospects seem to be better than expected in the Agricultural sector with total output likely to be greater than estimated in the Second Advance Estimate. This is quite creditable especially in the backdrop of the severe shortfall in South West Monsoon precipitation as well as the floods of late September/early October the previous year.
According to the estimate, released on 12 February 2010, food grain production in 2009/10 is likely to be 216.9 m.t., which is 17.6 m.t. lower than the output in 2008/09. The Kharif season is the largest contributor to this shortfall with a total production of only 99.9 m.t., a decline in production of nearly 18 m.t. Within this the greatest offender is rice with rice output in the kharif 12 m.t. less than that of last year. However, this shortfall is expected to be compensated to an extent with the rabi harvest. Wheat production in the rabi season is expected to be nearly equal to the previous year’s and rice production, currently pegged at 14.7 m.t, may eventually turn out to be higher than last year’s. Taking this into consideration, shortfall in rice production for the year as a whole may be restricted to 11 m.t.
No such consideration is present in the production of coarse cereals, which are mainly grown in the Kharif season and that too in the rain dependent areas of the country. A bad monsoon has seen the production of coarse cereals fall by 14.4%. Similarly, the production of pulses, while marginally better than last year with an increase of 0.17%, has proved very inadequate, considering the level of domestic demand and the limited availability of certain kinds of domestically popular pulses in the international market. Another agricultural commodity which has seen in a decrease in growth is oilseeds with a decrease of 1.4 m.t., a nearly 5% decrease when compared to last year. Out of these, groundnut production has suffered the most with a decrease in production of nearly 16.4 l.t. when compared to last year. The lower production is mostly due to poor rainfall in the kharif planting season in Central and Western India.
Another sector which has suffered is sugarcane production with output decreasing nearly by 12% to 2512.7 tonnes. This is indeed a cause for concern as last year too production suffered a large decline compared to the previous year. This has resulted in a big gap between demand and domestic production of sugar. India being largest consumer of sugar in the world, this imbalance between demand and supply has resulted in a severe escalation of both domestic and world prices of sugar.
The industry & services sector were both expected to show a strong recovery and is performing along the expected lines. The mining sector is presenting a strong output expansion similar to its performance in June and July 2009 but the growth in the output of crude oil and coal has shown a marked decrease. Hence, despite the large increase in the production of natural gas, iron ore and some other minerals, overall expansion of the mining sector has remained at less than 10 per cent in Q3 and third quarter and is expected to do so in the last quarter as well. Similar is the case with electricity generation which has shown a growth of only 4.5% in Q3 compared to 10% and 8% respectively in the months of August and September, 2009.It is expected that electricity generation growth will remain around 6 per cent in the final quarter of the current fiscal. This shortfall is in part due to lower hydel power generation, a consequence of the poor monsoons and the low level of reservoir capacity, as well as due to underperformance of thermal power plants due to inadequate coal production and delayed imports.
Manufacturing output has recorded an average growth of 9.2 per cent in the quarter ending September 2009 with growths crossing 11 per cent in October 2009, 12 per cent in November and 18 percent in December. The average increase in manufacturing output for Q3 stands at over 14 per cent and it is expected to remain constant for the rest of the financial year. Within this sector, intermediate, capital and durable consumer goods have shown the strongest recovery with non durable goods lagging partly on account of the fact that a large part of exportable goods belong to this category, such as textiles, where export recovery has been sluggish, and partly on account of the lower output of sugar.
On the bright side, strong recovery has been recorded in machinery and equipment as well as transport and equipment with a growth of nearly 44% and 82%, respectively, in December,2009. Other products that have shown growth in double digits are basic chemicals, petroleum refinery output and construction related cement output. While it is true that consumer goods such as cotton textiles, knitwear, leather products and food products have shown a lesser extent of recovery, the trend has been somewhat erratic partly on account of the fact that a significant proportion is exported and recovery on the export front is not yet firmly established and partly due to lower production of sugar.