External Sector

Exports during April- May 2005 are valued at US $ 13789.35 million, which is 19.81% higher than the level of US $ 11509.57 million in April- May 2004. Imports during April- May 2005 are valued at US $ 21002.82 million (Provisional) registering an increase of 40.91% over the level of imports valued at US $ 14905 million (Provisional) in April- May 2004. Oil imports during April- May 2005 are valued at US $ 6091.07 million (Provisional), which is 35.84% higher than oil imports valued at US $ 4484.13 million (Provisional) in the same period last year.

India’s trade deficit in August 2005 widened to US $ 3.14 billion from the corresponding period last year. It was at $ 2.04 billion a year earlier and $ 2.7 billion in July 2005. India’s export went up by 24.91% to $ 7.35 bilion in August 2005 as against $ 5.88 billion in the same month a year ago. In rupee terms, the exports were Rs 32,085.72 crore, showing a growth of 17.59% over the same period last year. The import during August 2005 was up by 32.44% to $ 10.4 billion as against $ 7.9 billion in August last year. The April- August 2005 trade deficit was at $ 17.4 billion, which is double to that of $ 9.7 billion in the same period last year.

Foreign Exchange Reserves surged from US$ 114 billion at end March 2004 to US$ 141 billion as on March 31st, 2005 and further to $ 145.55 billion as on week ended September, 2005.

The Indian Rupee, which had consistently appreciated against the US Dollar, and depreciated against other major currencies like the Euro, Pound Sterling and the Japanese Yen during the year 2004- 05, started weakening against the US Dollar. However, the trend was reversed in September 2004, with the Rupee firming up against the US Dollar, while showing a fluctuating trend against other currencies. The Rupee made handsome gains in December 2004 against the US Dollar as it appreciated to 44 per dollar. After gaining against the dollar in recent months the Indian unit has been weakening and is presently moving in the I US$ = 43.80- 43.95 INR range.

India also emerged as a favoured travel destination for international tourists, with travel receipts rising by around 28% during this period.

The Foreign Institutional Investors (FII) inflows have been a record US$ 8 billion till September 2 in the calendar year 2005.

Capital Markets

The equity markets are scaling new lifetime highs and ending at record highs. The BSE Sensex crossed the historic all time high of 8100 in mid September 2005. India’s market capitalization went over the half- trillion US dollar mark for the first time and settled at US $ 506 billion. As a result in terms of capitalization, India became the 14th largest market in the world and the third largest in Asia. India now ranks behind Hong Kong’s $ 1 trillion and S Korea’s $ 557 billion. However, in terms of India’s share in global market cap, it is only a marginal 1.3%. The buoyant secondary market has also led to a sharp increase in activity on the primary market.

Inflation

Average Inflation Rate based on WPI during April- May 2005- 06 stood at 4.9% as against 5.4% in the same period last year. Inflation rate for manufactured products during April- May 2005 stood at 4.6% as against 5.9% in April- May 2004.

Economic Reforms

Way back in 1951, India adopted the Soviet model of planning by setting targets in each sectors for a five year period and was a controlled economy. Situations created by poor balance of payments, rupee devaluation, rising oil pool deficit, inflation, sluggish capital markets, general industrial slowdown, financial strains created in part by the Gulf War and the Asian & global recession provided impetus to economic reforms initiated in 1991.

The wide ranging program of economic reforms covered economic liberalization, reducing government controls on production, trade & investment, abolition of industrial licensing- except for strategic industries, abolition of import licensing, deregulation of interest rates, full convertibility of the rupee on current account, automatic approval of FDI in many sectors, opening of areas previously reserved only for the public sector to the private sector, realignment of direct taxes & tariffs etc.

The process of economic liberalization has transformed the Indian economy from an inward looking & highly regulated economy to a transparent & market oriented one with emphasis on private sector participation. The second wave of the reforms process in the various sectors of economy including petroleum, power, ports, roadways and telecom has also contributed to the process of transformation that we see today.

As a result of these far reaching changes, India has moved firmly into the front ranks of the fastest growing economies in the world. The economy has made significant strides over the last two decades with average growth rising from a low level of 2.9% in the seventies to 5.8% in the nineties and 8- 9% presently.

The awareness of the benefits of economic reforms have gained currency among the Indian public following the achievements of macro economic stability, accompanied by accelerated economic growth. Consequently, the process of economic growth has gained national consensus. The Congress led UPA Government formed in 2004 reaffirmed its commitment to the process of economic reforms. However due to compulsions of running a coalition government dependent on outside support of left parties, key reform measures have been stalled.

Infrastructure Sectors

Though India has progressed immensely over the last fifty years, India faces the formidable challenge of meeting the basic requirements of one billion people, who increasingly aspire for a better quality of life. The Infrastructure needed to meet this requirement in terms of roads, ports, airports, electricity, communication facilities, health facilities, education facilities, petroleum etc calls for huge investments in the next few years.

Meeting infrastructure requirements in one sector may not be sufficient as one area is linked to another through the supply chain that ultimately delivers electricity, water and other commodities to the consumers. These links, crucial for the growth and development of India include power plants, electricity transmission & distribution systems, telecommunication systems, water treatment plants, ports, roads & expressways, bridges, pipelines, railways, tracks, airports, product handling and storage facilities (coal, oil and others), etc. In addition, there are the allied requirements of trucks, ships, tankers, tankages, terminals, jetties, barges, tank wagons, truck wagons etc.

The infrastructure sector constitutes the backbone of any growing economy. Strong & robust infrastructure facilities at reasonable cost are absolutely necessary if rapid economic growth is to be achieved and sustained. The Tenth Five Year Plan has targeted an annual growth of 8 per cent in GDP over 2002- 07 as compared to the average of 5.6 to 5.7 per cent recorded during the eighties and nineties. However, further acceleration of growth requires significant investments in infrastructure. The energy- transport infrastructure, in particular, will be a major determinant of an acceleration in GDP growth.

The Common Minimum Program (CMP) of the Congress led UPA Government attaches the highest priority to the development & expansion of physical infrastructure like roads, highways, ports, power, railways, water supply, sewage treatment and sanitation. ‘Public investment in infrastructure will be enhanced, even as the role of the private sector is expanded. Subsidies will be made explicit and provided through the budget’.

Infrastructure Sectors Growth & Physical Performance

Trends in Output of Infrastructure Industries (Growth in %age)

Base: 1993- 94= 100; @ April- May 2005

Physical Output Performance of Infrastructure Industries

* Provisional; @ April- May 2005