The following is the full text of the speech: It is a pleasure for me to be amongst you and associate myself to a very important event in India i.e., “Pravasi Bharatiya Divas convention 2009”.   India always has had very close ties with US and therefore, regional session titled “USA” will bring in a lot of synergy between India and US which will eventually help in increased mutual co-operation, better industrial ties, and removing the trade barriers.

Hon’ble Prime Minister Dr. Manmohan Singh, during the inaugural session of the convention, has already presented his vision for the close co-operation between the two countries. Traditionally, NRIs have been playing a very vital role in connecting India through globalization and has been playing a key role in development of India.  Their efforts in infusing the capital in the country and transferring the technology in many key sectors are laudable and needs appreciation.  I am sure that their continued support and efforts will definitely put India on top of the globe in terms of economic development.

The telecom sector has been recognized as one of the major drivers in the economic growth of the country.  In recent past, India has achieved a remarkable growth in telecom sector and has become the second largest wireless network in the world after China with over 350 million mobile connections.  India is also the fastest growing telecom market in the world with an average addition close to 10 million subscribers per month.  Recognizing the potential in telecom sector, India is now the most sought after destination for investment in the telecom industry worldwide.  As a result, Foreign Direct Investment inflow has gone up from US$ 478 million in 2006-07 to US$ 1261 million in 2007-08.  With our proactive policies, we have been able to provide state-of-the-art world-class infrastructure at globally competitive tariffs and reduced the digital divide by extending connectivity to the unconnected areas. Full Text

India’s industrial production moved into positive territory in November 2008 after the negative growth it had clocked in October, according to data released by the ministry for industry and commerce on Monday. The Index for Industrial Output (IIP) registered a 2.4% growth in November as against the negative 0.3% for October that had set alarm bells ringing.

In fact, an ET poll of economists last week had forecast that the IIP would grow by 1.6% in November , the only such survey to hint that the index would move into positive terrain. However, amidst the unexpected good news, the data shows a fall in the capital goods output for the first time since 2002. “The growth in the consumer goods segment to 4.4% — largely on account of strong growth in consumer non-durables segment — shows that the consumption demand in the rural economy remains unaffected.

“With monetary and fiscal measures to give a boost to the slowing economy setting in, I expect the IIP numbers to be healthy from here on. The aggregate demand in the economy is already showing signs of improvement,” said Suresh Tendulkar, chairman of Prime Minister’s Economic Advisory Council. Factory output rebounded from a negative 1.2% year-on-year (y-o-y ) growth in October to a positive 2.4%. Ten out of 17 sub-groups in the manufacturing segment posted positive growth in November. The April-November period witnessed a cumulative growth of 3.9% over the corresponding period last year. However, part of the improvement may be due to the positive base effect. The new IIP figures add to the interim report that rate-sensitive and export-oriented sectors had shown signs of revival in December.

A bounce-back in the growth rate for the intermediate goods segment to 2.6% for November, which had contracted for three consecutive months, suggests higher industrial growth in the months to come. The positive sentiment sets in even as the capital goods sector contracted by 2.3% in November , the first contraction since April 2002. The production of consumer durables, too, declined 4.2% y-o-y , indicating some curbs on discretionary expenditure. Yes Bank’s chief economist Shubhada Rao feels the worst patch in industrial growth is over and industrial growth will be in the 2.5-4 % range for the rest of the fiscal. “With the aggregate demand in the economy picking up, deflationary pressures will be kept at bay,” she said.

India Inc improved capital productivity by 36% between 2001-02 and 2007-08. Capital productivity captures revenue generated per unit of capital employed and indicates the productivity churned out of the fixed assets of a company. The rise in capital productivity coincided with the six year period of high economic and corporate growth in the country. Capital productivity of industrial sector rose from 1.13 in FY02 to 1.54 in FY08. This basically means that the revenue generated by companies for every Rs 1 crore worth of their fixed assets rose from Rs 1.13 crore in 2001-02 to Rs 1.54 crore in 2007-08. This was due to better sales growth compared to increase in capital(machinery, funds etc).

While aggregate sales of 2,000 companies in the study, grew at compounded annual growth rate(CAGR) of 18% during the six year period, their fixed assets grew at CAGR of 12%. The ratio, which stood at 1.20 in FY01 declined in FY02 but has seen a consistent improvement thereafter. But, the increase was marginal last year when it moved from 1.52 in FY07 to 1.54 in FY08. This could be due to modest performance by the core manufacturing sector, accounting for 87% of sales and 70% of fixed asset base. Core manufacturing sectors saw a marginal decline in capital productivity from 1.96 to 1.94 between FY07 and FY08.

It must be noted that higher ratio for certain sectors is partly due to higher realisation per unit of sale and does not necessarily imply improvement in production. Companies which have seen maximum improvement in capital productivity over the last six years include Rajesh Exports, Mangalore Refinery & Petrochemicals, Sterlite Industries, Haldia Petrochemicals, Jindal Saw, L&T, Siemens, Hindalco and NMDC. Most of these companies represent sectors such as oil, mineral, metals, and jewellery which have witnessed sharp increase in prices during the period backed by high global economic growth. This helped them generate more revenue out of the same assets. For engineering companies such as L&T and Siemens, this is an indication of better asset utilisation as there has been no sharp run in their product prices.

Another important feature of the analysis is the performance of the top 100 Indian companies by revenues. These top firms had a capital productivity ratio of 1.13 in FY02 around the same levels s that of all companies put together. But these firms have managed better utilisation of capital resources, leading to productivity ratio of 1.62 against 1.54 for aggregate set, translating into productivity growth of 43% as against 36% for all companies put together. The top 50 companies have even better ratio of 1.83, up from 1.22 in FY02 i.e., a capital productivity growth of 50% for the six year period.