SERVICES SECTOR IS THE ONLY SAVING GRACE, AGRICULTURE DISAPPOINTS

State's growth engine sputters, GDP falls below national average

 MAHARASHTRA on Wednesday unveiled economic growth below the national average for last year, in an unprecedented move that shows India's economic powerhouse, which nurtured hope and sustained dreams over the years, scarred by the slowdown.
    The state economic survey for 2008-09, which was tabled in the legislature on Wednesday, shows Maharashtra's GDP growth for 2008-09 at 6.7%, a fall of 2.5% from 2007-08, as agriculture fell by the wayside and services zoomed ahead. The budgetary projection was at 9%.
    Advance estimates by the Central Statistical Organisation expect the national economy to grow at 7.1% in 2008-09.
    The state's service sector has registered a 10.5% growth — marginally higher than the budgetary target — at the cost of agriculture, which has shrunk 7.1% on account of a 25-49% drop in the production of major crops. The sectoral composition of Maharashtra's income shows the services sector contributing almost 60%, followed by the industrial sector at 25% and agriculture at just 15%.
    "The GSDP has grown, but it is almost entirely driven by the services sector. This also means economic growth in Maharashtra has not spread beyond the urban parts. Rural Maharashtra, especially the agriculture sector, has a different story to tell," BJP's legislative party leader and former Maharashtra finance minister Eknath Khadse said.
    A preliminary estimate of Maharashtra's GDP at current prices shows a 16.1% growth in 2007-08 over the previous year's gross state domestic product (GSDP). A closer look at the findings of the economic survey reveals that the growth was largely driven by the expansion of the services sector, which is estimated to have grown at 9.5% in 2007-08.
    The secondary or industrial sector also shows a 4.8% fall in growth as against 8% in 2007-08. "The point is, how many memoranda of understanding that the state almost routinely signed for industrial projects have actually reached the commissioning stage? Maharashtra's performance in investment under implementation is not as good as the government claims it to be," Mr Khadse added.
    Similarly, the number of employed people in the state has gone down from 4.3 crore in 2004-05 to 4.1 crore in 2007-08, according to the National Sample Survey. In fact, the UPA government's flagship National Rural Employment Guarantee Scheme provided only 4.2 crore person-days in 2008-09 as against 6 crore in 2007-08.
    There are, however, a few positives for the Congress-NCP government. Maharashtra's per capita income at current prices is estimated at Rs 47,051 in 2007-08 as against Rs 41,144 during 2006-07.
    Tax revenue has increased over the 2007-08 receipts, but are estimated to fall below the budgetary targets for 2008-09. Fiscal deficit is estimated to have declined from 2.6% in 2007-08 to 2.1% in 2008-09.
    From April to December 2008, tax revenue increased by 20.7% over the corresponding period in the previous fiscal. The 2008-09 budget estimated tax revenue at Rs 51,893 crore, but the first nine months of the previous fiscal fetched only Rs 38,263 crore.
    "The last quarter of 2008-09 is unlikely to have helped the state reach the budgetary target. In fact, the final figures could indicate a drop of around Rs 2,000 crore in tax revenue in 2008-09 as against the budgetary target," said an official in the finance ministry.
    Despite slowdown, Maharashtra's success story in industrial investment and FDI inflows seem to have continued for the better part of 2008.
    Between 1991 and 2008, the state received 14,957 industrial projects with an investment of more than Rs 5 lakh crore and employment potential of about 27.5 lakh. Of these, 6,778 projects, totalling an investment of Rs 1.1 lakh crore, have started production.
    During the 17-year period, Maharashtra bagged FDI inflows worth Rs 75,096 crore, a noteworthy achievement, given that the second-best state in this sector is Tamil Nadu, with Rs 27,873 crore FDI proposals.
Agriculture slumps 7.1%; services sector
clocks 10.5% growth
THE economic survey for 2008-09 couldn't have painted a dryer picture of Maharashtra's agrarian landscape: In 2008-09, growth in the agriculture and allied sector has fallen by a steep 7.1%, following two fiscals of plenty, reports Our Political Bureau in Mumbai. The state's sunrise sector, services, is a study in contrast: It grew at 10.5% in 2008-09. This not only constitutes an increase of 1% over the previous fiscal, but is also a marginal rise over the budgetary estimate for 2008-09. The poor show in the farm sector has been attributed to a steep drop in yields of major crops, including foodgrains. The survey says foodgrain production for the kharif and rabi seasons was at just 117.1 lakh metric tonne, down 24% over 2007-08 output. In oilseeds production, Maharashtra registered a fall of 49%. The sugar story also turned bitter in 2008-09, as cane production fell by 43%, owing to a 30% reduction in harvested area. The story was remarkably different in the previous two fiscals, though. In 2006-07, the state's agriculture sector grew at an impressive 10.5%, followed by almost identical 10.4% growth in 2007-08. The survey attributes this growth to the "better condition of kharif and rabi crops due to a well spread-out and satisfactory monsoon."
Debt burden may go up to Rs 1,58,520 crore
MAHARASHTRA seems to be getting into a debt trap. The state's debt burden is expected to shoot up to Rs 1,58,520 crore in 2008-09 as compared to Rs 97,674 crore in 2003-04, reports Our Bureau in Mumbai. The present Congress-NCP government came to power in 1999, launching a tirade against the Shiv Sena-BJP government for its high debt. The saffron combine, through a number of special purpose vehicles (SPVs), had a large borrowing from the market, taking the state's debt to Rs 45,000 crore. Ten years after it came to power, the Congress-NCP has raised the state's debt by over 300%. The debt burden, which was Rs 97,674 crore in 2003-04, went up to Rs 1,44,828 crore in 2007-08. However, its gross state domestic product (GSDP) has declined to 28.4% from 33.5%, according to the Economic Survey of Maharashtra 2008-09, while its revenue receipts have declined to 181.3% from 284.2% during the period. In 2008-09, the burden of debt is expected to be at Rs 1,58,520 crore, which is 25.8% of GSDP. The survey said high expenditure on interest payments always has an impact on revenue and fiscal deficits. In the past few years, with concerted efforts of the state government to restructure debt portfolio, the average cost of borrowings has declined from 12% in 2003-04 to 9.2% in 2007-08.

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