Economic Survey: At a glance

OUR BUREAU New Delhi | Updated on July 09, 2014

Growth of NPAs in banking sector

Non-performing assets have risen to 3.9 per cent of the total credit advanced as on March 2014, compared with 2.36 per cent in March 2011, according to the Economic Survey. It states that the rise in NPAs was due to the slowdown and high levels of leverage of sectors such as textiles, chemicals, iron and steel, food processing, construction and telecommunications. The RBI in the Financial Stability Report (December 2013) identified five areas—infrastructure, iron and steel, textiles, aviation and mining — as stressed sectors. Public sector banks have high exposures to the ‘industry’ sector and to such ‘stressed’ sectors in particular.

Capital control reforms

The Economic Survey stated that capital controls under the Foreign Exchange Management Act does not support a rapidly globalising economy. Over the last 15 years, numerous subordinate legislation have increased the cost of doing business in India. In order to rectify the situation, the Survey recommended a drastic simplification of cross border activities. As a method to simplify the current mechanism, the Survey suggested that a single window for foreign direct investment can be created if all rule-making under FEMA rests within a Department of the Government and all transactions are permitted other than those in the negative list.

Bank credit growth slowdown

The gross bank credit flow to industry was 14.9 per cent in 2013-14 against 17.8 per cent in 2012-13, highlighting the slowdown in the economy. “Credit flow to mining remained nearly stagnant with 0.05 per cent growth during 2013-14. In keeping with the performance of the power sector during 2013-14, credit flow to the sector increased by 24.9 per cent,” the Economic Survey stated. Petroleum, chemicals and chemical products, basic metals, transport, and all engineering sectors registered lower growth in gross bank credit flow during 2013-14 compared to the previous year.

The rate of growth of bank credit to major infrastructure sectors moderated from an average of 44.8 per cent in 2011-12 to 17.7 per cent in 2013-14.

FDI in rail-based components

Foreign direct investment in rail-based components rose sharply to ₹236 crore in 2013-14, nearly eight times more than ₹29.85 crore in 2012-13. In fact, the sector’s FDI inflow was the fourth highest in major infrastructure sectors behind telecommunications, power and non-conventional energy. As per the Survey, this was one of the four sectors which had a positive growth in FDI inflow during 2013-14.

Published on July 09, 2014

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