Economic Survey of India 1995-96 HighLights - The official press release.
New Delhi, July 19, 1996
ECONOMIC SURVEY UPDATE TABLED IN PARLIAMENT
"Economic Survey 1995-96, An Update" was presented today to Parliament. The
highlights are:
In 1995-96, the economy performed better than what was reported in the Survey in February
1996:
growth rate revised up from 6.2 percent to 7 percent
inflation down from 10.4 percent at the end of 1994-95 to 4.4 percent at the end of 1995-96,
and remaining low at 4.2 percent in end-June 1996
after declining to US $17 billion by end of 1995-96, foreign currency assets rose to US
$17.7billion by July 12,1996
surge in industrial production at about 12 percent per year continued throughout 1995-96.
In view of the slowdown in agricultural growth despite a normal monsoon, there is concern
about under-investment in agriculture. Increases in the subsidy (per tonne) of phosphatic and
potassic fertilizers announced in early July 1996 are expected to help correct the distorted pattern
of farmgate prices for these two and nitrogenous fertilizers.
Although export growth was strong at 21 percent in U.S. dollar terns in 1995-96, there was a
deceleration in the growth of both exports and imports during April-May 1996.
Net inflows through foreign institutional investors (FII's) exceeded US $ 1 billion during the
first quarter of 1996-97.
In June 1996, to ease Indian industry's access to external funds, the Government permitted
preferential access to development financial institutions, infrastructure sectors and exporters to
external commercial borrowing. The June-relaxation in the guidelines on Euro issues and in end-
use restrictions on GDR proceeds are significant steps towards liberalization.
The continued high levels of Government borrowing associated with a large and over-budget
fiscal deficit was the main reason for the tightness of credit markets and high interest rates
throughout 1995-96. The only way of reducing the high real interest rates and augmenting the
availability of investible funds to production and investment, without risking the resurgence of
inflation and pressure on the external sector, is to reduce the borrowing requirement of
Government, that is, the fiscal deficit.
Since the latter part of 1995-96 and including the first two months of 1996-97, the rate of
growth of electricity production has been slowing. The rail and road transport system and port
capacities are also under strain. Slow pace of reform in key government-dominated infrastructure
sectors, such as electric power, can undermine the recent pattern of accelerating aggregate
economic growth.
The pace of reform kin capital markets, for example, the eligibility norms to improve the
quality of new issues has been maintained in 1996.
Three priority issues are:
the fiscal challenge: how to control the fiscal deficit and promote public savings
through good tax policy, appropriate user charges for public services, adequate return from
government equity in public enterprises, a well-designed and transparent program of public sector
divestiture, and control on inessential government expenditure ?A high fiscal deficit works against
high growth of employment, reduction in poverty, low inflation and a viable external sector.
the infrastructure challenge: how to provide adequate and reliable economic
infrastructure services at reasonable cost and with sustainable financing and pricing policies?
There is an urgent need to develop and implement a viable policy framework and institutional
structures for a shift from the old model of public monopolies, and to have access to long-term
finance.
employment and poverty alleviation: Rapid, broad-based, labor-intensive growth is
the surest route to alleviate poverty and giving dignity and voice to the poor. There is a need to
supplement the growth promoting strategy by improvements in primary education, primary health
care, safe drinking water, housing, rural roads, and pubic distribution system which build the
capacities and skills of the poor, Broad-based agricultural growth offers enormous opportunities
for alleviating rural poverty.
