Indian Economic Development And Policies

Part-B: Dynamics of Population Ageing: How India can Respond Dr. Tarun Das, Economic Adviser, Ministry of Finance, India.

1. Introduction Like other countries India is confronted with the problem of ageing of population. According to some estimate, number of Indians over 60 years will grow from 76 million in 2000 to more than 218 million by 2030. Social Security System that prevails in India has not been very effective to provide coverage to the existing population and to confront the challenges emerging due to ageing and fiscal constraints. Government is attempting to revamp Indian Social Security System, and to put in place mechanism of Social Security. Social Security Reforms form an integral part of ongoing reforms in developed and developing countries. The policy makers try to find out an appropriate mechanism to confront to complex issues related to demographic burden owing to population ageing, growing inability of the government to finance unfounded pensions, pressure on government budget due to increasing costs of retirement benefits. Pension Reforms have, therefore, become a hot pursuit for planners, policy makers, market analysts. 2. Present Social Security System in India Present system of Social Security in India is based on three components, namely; Compulsory contribution, Tax Preferred Voluntary Contribution, and Social Assistance (Table-1). Compulsory component includes Employees Provident Fund (EPF), Employees Pension Fund, and Central Service Pension Scheme to the Government Provident Fund, Special Provident Fund. Tax Preferred Voluntary component includes Public Provident Fund (PPF), Superannuation Plans and Personal Pensions. Special Assistance Component includes State level Social Assistance and National old age pension scheme. The Employees Provident Fund Organisation (EPFO) manages employees Provident Fund Scheme 1992, Employees Deposit Link Insurance Scheme 1996, Employees Pension Fund 1995, under EPF Schemes. Out of total work force of 400 millions EPF cover 26 million members and the other mandated Provident Funds covered 2 million, EPFO administered the EPF – collects money and maintains records, invest funds according to government guidelines. By the end of March 2000, PF & Pension Funds amounted to 23% of gross household financial assets and 2.8% of GDP next to the share of banking sector. By the end of March 2000, EPFO covered 24.5 million members under 33 million establishments. Progressive contributions under Employees’ Provident Fund, Employees’ Pension Fund and Employees’ Deposit Linked Insurance Fund stood at Rs.752 billion, Rs.42 billion and Rs.1.3 billion respectively.

43

Progressive investment by EPFO during 1999-2000, stood at Rs.792 billion for Provident Fund, Rs.274 billion for Pension Fund, and Rs.2.8 billion for Deposit linked Insurance. The rate of interest for EPF has been reduced progressively from 12% in 1999-2000 to 9.5 percent in 2004-05. The total Pension Fund in India at the end March 1996 was estimated at Rs.1283 billion around 11.7% of GDP). EPF 1952 is the largest among all schemes, which accounts for 46% of total funds. The rate of contribution under EPF varies from 8.33% to 10%. The EPF is managed by the Central Provident Fund Commissioner, which invests the funds through State Bank of India as per Government Guidelines. According to the government norms, minimum 40% is invested in Central and State Government bonds, 40% in Securities of Public Financial Institutions, Public Sector Enterprises, Banks etc. and 10% can be invested in the rated Private Sector Bonds. Table-1: Government sponsored schemes for old age security in India Scheme Legal coverage Effective coverage Financing A. Compulsory contributions 1. Employees Employees in firms About 5.8 per cent Employer and Provident with more of labour employee Scheme than 20 force contributions employees 2. Employees Employees in firms About 5.4 per cent Employer and Pension Fund with more of labour government than 20 force contributions employees 3. Civil Service Civil servants in About 3.5 per cent State or Centre Pension Centre and of labour government Scheme state force governments 4. Government Civil servants in About 3.5 per cent Employee Provident Centre and of labour contribution Fund state force governments 5. Special Provident Certain occupations About 0.5 per cent Employer and Funds in Jammu & of labour employee Kashmir force contributions B. Tax preferred Voluntary Contributions 6. Public Provident All individuals About 0.8 per cent Individual Fund of labour contributions force 7. Superannuation All employees About 0.2 per cent Employee plans of labour contributions force 8. Personal pensions All individuals About 0.2 per cent Purchase of annuity of labour like products

44

9. State level social assistance 10. National old age pension scheme

force C. Social assistance Varies by states Varies by states Persons over age 65 years

About 15-20 per cent of old people of over 65 years

State budgets Central budget

3. Pension reforms in India The pensions system in India is large and fragmented, while the majority of the country's labour force operate in the informal sector and lack coverage. Government is preparing to reform the system by simplifying regulation, widening accessibility and extending pension provisions into the unorganized sector, estimated at around 93% of the labour force. Government is examining the possibility of establishing a single regulatory authority to cover both the pensions and insurance sectors. Current national pensions system consists of four main components: 1. Private-sector cover. The Employee Provident Fund Organisation (EPFO) functions under the Ministry of Labour and is primarily responsible for the retirement income of private-sector employees. It consists of a mandatory savings defined contribution scheme, known as the Employee Provident Fund, and a defined benefit scheme -- the Employees Pension Scheme (EPS). The EPFO is applicable only to those enterprises with at least 20 employees and covers just over 5% of the country's total labour force. Nevertheless, its total assets are large, amounting to around 7% of GDP. 2. State-owned schemes. Some public-sector financial organizations such as banks, insurance companies and state-owned enterprises, offer stand-alone retirement schemes. They typically operate with fixed terms and permit withdrawals after a minimum period. 3. Civil service provision. Civil servants at both central- and state-government levels have their own retirement benefits scheme. This includes a noncontributory, indexed defined benefit (DB) pension, with survivors' benefits, a mandatory provident-fund savings scheme to which a defined contribution is made, along with a gratuity. The government is liable for the entire scheme. 4. Post Office scheme. India's Post Office Savings Bank (IPOSB) is the only public-sector organization that operates voluntary retirement schemes. The IPOSB is the single largest financial institution in the country, controlling deposits equivalent to 9% of GDP. However, overall, the pensions system is beset with chronic problems, including:

45

• • • • •

Poor management of a large asset pool; Exclusion of the vast majority of the labour force, who are dependent on voluntary retirement schemes; Lack of pensions harmonization, which impedes employee mobility and labour market flexibility; Low flexibility in fund management and restrictions on portfolio choice; and Excessive control in the hands of government and trade unions, which has led to the politicization of the system.

In the case of the EPFO, more than 80% of withdrawals are premature (before retirement or death), largely because a large number of workers leave their jobs before retirement age. It is almost impossible to transfer EPFO contributions when moving to another job. As a result, most of those who switch jobs withdraw the contributions they made under their former employer and start a new scheme with their next employer. There are also indications that the EPFO may be in financial trouble: a recent actuarial report revealed an unfunded gap in the EPS worth almost 175 billion rupees (3.8 billion dollars). Committee recommendations. In 1999, the government established the OASIS (the Old Age Social and Income Security) committee in order to resolve these problems. It was asked to recommend a pension system that would enable every worker to obtain a pension with modest contribution through their working career. The committee's report, completed the following year, made several recommendations. These included: • • • • • •

Introducing a defined contribution scheme; Creating an individual retirement account; Allowing pension fund managers to administer funds, which civil servants and trade union representatives currently control; Using professional instruments to earn higher returns than the current system's reliance on government bonds; Cracking down on the non-withdrawal of savings in order to gain tax benefits; Requiring that a certain minimum percentage of accumulated funds be spent on buying annuity at the time of retirement.

The report also recommended that the provident fund and pensions structure be placed within a single regulatory framework. However, while these recommendations have been welcomed, they do little to expand pensions coverage to the majority of workers who cannot afford social security after retirement. Dovetailed reforms. Government has recognised this problem and is trying how to improve pensions coverage, especially for poorer workers in the informal sector. Defined Benefit (DB) System has been criticized has been criticized on the ground that the system imposes burden on exchequer, generates unemployment, leads to non-optimal resource allocation, does not boost long term savings, and capital market development and impedes the growth of economy. Whereas on the other hand, defined contribution (DC) managed through the individual contributions provides freedom of choice to the

46

individuals and better return due to competitive funds management, enhances national savings and reduces burden on exchequer. Government has now switched over to defined contribution system organized around employees contribution rate and flows of retirement pension determined solely by the history of individual contribution. The defined contribution system is fully funded system financed solely by the individual unlike unfounded pay-as-you-go (PAYG) system under defined benefit system. The most important feature of the newly reformed pension system is the key role of private funds managers who are considered to be more efficient and able to provide better return than the public funds. 4. Social Health Insurance in India There is only one scheme in India – the Employer State Insurance Scheme (ESIS) – that qualifies as SHI in its classical definition. The three main characteristics of this scheme are that it is mandatory, contributory and there is the Employer State Insurance Corporation (ESIC) that acts as the autonomous body and manages the funds. The other scheme is the Central Government Health Scheme (CGHS), which is also contributory and employment based, but neither does it have a separate autonomous fund manager, nor is it compulsory. Further, the contributions are almost flat and nominal. . (a) Employee State Insurance Scheme (ESIS) As a first major initiative for providing social security, the Parliament of India promulgated the Employees’ State Insurance Act (E.S.I. Act) in the year 1948. The E.S.I. Scheme was initially launched in 1952 in two centers and expanded in a phased manner across the country with the active involvement of state governments. The Act is applicable to non-seasonal factories using power and employing ten or more persons, and non-power using non-seasonal factories and establishments such as shops, hotels, restaurants, cinemas etc, employing twenty or more persons. Seasonal factories, mines, and plantations have not been covered under the Act. It also does not cover workers in the unorganized sector and self-employed workers. Out of total labour force of 412 million, about 8 million workers i.e. about 2 per cent– have been covered under the ESI Act. Presently ESIS covers 28 per cent of the organized workforce compared with coverage of 38 per cent in mid 1950s. The total revenue under ESIS in 2001-02 was Rs.173 billion, of which 72 per cent was from the contribution of employees and employers. The total expenditure adds up to Rs.110 billion out of which 64 per cent accounts for medical benefits. The scheme is making profits, and in 2001-02 a savings of Rs.62 billion (36 per cent of total revenue) was transferred to the ESI general reserve fund. (b) Central Government Health Scheme (CGHS) Central Government Health Scheme (CGHS) was introduced as a contributory plan in 1954, to provide medical coverage to central government employees (both, working and

47

retired) and their families, without involving the system of medical reimbursement. As for the organizational set up, CGHS is operated by the Director, CGHS, who is directly appointed by the Ministry of Health. There are currently about 1 million cardholders with 4.3 million individual beneficiaries. The employee contribution ranges from Rs.15 to Rs.150 per month depending on the salary. Pensioners can avail of ‘whole life card’ by paying ten years’ contribution at the time of retirement. ESIS and CGHS together cover about 3 per cent of the population, including beneficiaries and their families. However, some other sectors of the government are also covered by non-contributory schemes, which are in the nature of social welfare schemes, and are essentially benefits given to the various categories of employees in the government sector. (c) Schemes under specific ministries. Certain ministries like Railways, Defense and Coal provide health coverage to their employees as a benefit, while some government-sponsored schemes provide health coverage to specific employment-based target population. These schemes serve handloom workers and handicrafts artisans sponsored by the Ministry of Textiles. Railways Health Services Railways employees and their families can avail of the Railways managed health facilities without paying any contribution. Retired employees can opt for continued health benefits by contributing the last month’s basic pay. The employee coverage includes 1.6 million current employees and 0.25 million retired employees. Currently, about 8 million beneficiaries avail of the health services through a network of 584 health units, 124 hospitals, including 5 super-specialty hospitals and 9 apex referral hospitals. Defense medical services Similarly, Ministry of Defense, through an Inter-service organization called ‘Armed Forces Medical Services (AFMS), provides comprehensive health coverage to the serving Armed forces personnel and their families of all three wings; Army, Navy and Air Force. The total beneficiaries add up to 6.6 million. There is no contribution from the beneficiaries and the entire expenditure comes from the defense budget. Ex-servicemen Contributory Health Scheme A newly introduced scheme– Ex-servicemen Contributory Health Scheme (ECHS) – provides medical care to ex-servicemen, war widows and their dependents. Schemes under the Ministry of Textiles Ministry of Textiles offers schemes to provide social security to the handloom weavers and handicraft artisans, which involve health coverage. Schemes of Public Sector Undertakings

48

There are 240 Central Public Sector Enterprises (CPSEs) established by the Government of India. As on 2002, the employment in these enterprises was about 2 million excluding casual workers. These public enterprises provide a range of welfare activities to their employees, in keeping with the spirit of a socially responsible employer. The total profits of the CPSEs for 2001-02 amounted to Rs.260 billion and total expenditure on social overheads, education, medical and cultural subsidies amounted to 22 billion accounting for 8 per cent of total expenditure.

49

Public-Private Partnership In recent years various experiments of public –private partnership have taken place to improve health services. There are special schemes in the state of Jammu and Kashmir, Rag Pickers’ scheme in Pune, Students health scheme in West Bengal etc. A Communitybased ‘Universal Health Insurance Scheme’ was launched by the four public sector general insurance companies in July 2003. Up to March 31, 2004, 4.17 lakh families involving 11.62 lakh persons have been covered under the scheme. Some States have taken initiatives to formulate social insurance for people below poverty line (see Box). • • •

•

Box-1: Ongoing initiatives by states for health insurance For meeting hospitalisation cost of BPL families, Kerala has proposed a Health Insurance Scheme with contribution from the individual, State and the PRI administered through the Kutumbashree self-help group. In Delhi, a government funded health insurance scheme ‘Arogya Nidhi’ is being taken up. For secondary care in government institutions, the state plans to initiate a pilot project on health insurance for people below the poverty line. In Andhra Pradesh a health insurance scheme is being implemented, under which a cover of Rs 20,000 towards hospitalization charges for a period of five years is assured for the acceptor of sterilization and his/ her two children, subject to a maximum of Rs. 4,000 per year Madhya Pradesh and Himachal Pradesh are in the process of launching Community Health Insurance Schemes.

On a pilot basis in 50 districts in the country, on January 23, 2004, Government launched a social security scheme for workers drawing pay/wages/income not more than Rs.6, 500 per month in the unorganized sector. The scheme will be funded by contributions at a rate of Rs. 50 per month by eligible workers in the age group of 18-35 years and of Rs.100 per month by those in the age group of 36-50 years. The employers, wherever identifiable, in both cases will contribute at a rate of Rs.100 per month. The government will contribute at the rate of 1.16 per cent of the monthly wages of the worker. Table-1 summaries the extent of coverage of health insurance under different schemes. Table-1: Health Insurance Coverage in India Schemes Beneficiaries (in million) 1. The Employees State Insurance Scheme (ESIS) 25.3 2. Central Government Health Scheme (CGHS) 4.3 3. Railways Health Scheme 8.0 4. Defense Employees 6.6 5. Ex-Servicemen (in defense) 7.5 6. Mining and plantations (public sector) 4.0 7. Health insurance (public sector non-life companies) 10.0 8. Health insurance (private sector non-life companies0 0.8 9. Health insurance by Life insurance companies 0.2 10. State sponsored schemes 0.5 12. Employer run facilities (private sector) 6.0 Total 73.2 50

5. Caring for the Elderly People The aged people, in the wake of declining family support system and other socioeconomic circumstances, are left helpless and require the support and protection from the State. To fulfill the commitments of the National Policy on Older Persons, special emphasis is being placed on expanding the on-going programs of old age homes, day care centers, mobile Medicare units. Medicare centers are being implemented under the scheme of ‘Integrated Program for Older Persons’. Financial assistance has been extended to 451 NGOs for running 222 Old Age Homes, 201-Day Care Centers and 27 Mobile Medicare Units. A special pension policy - Varishtha Pension Bima Yojana for persons aged 55 years and above was also launched on July 14, 2003 by the Life Insurance Corporation of India. The policy guarantees an annual return of 9 percent in the form of monthly payment. Minimum pension is Rs.250 per month and maximum Rs.2, 000 per month. For monthly pension a single premium is payable in lump sum. The minimum premium is Rs.33, 335 and the maximum is Rs.2, 66,665. There is also special deposit scheme for senior citizens with an interest of 9 per cent. Senior citizens are given special rebates for income tax and property tax. They are entitled for concessions for both rail and air fares. 6. Migration India’s stock of human capital in terms of qualified people is one of the highest in the world (Table-1). Every year India adds about 2.3 million English-speaking graduates compared with 1.2 million graduates in the US. With limited opportunities in the domestic market, Indian educated labour continues to look for outsourcing opportunities and job offshore. In the past, India participated in the global labour arbitrage through migration. The acceleration in the outsourcing in services and manufacturing in recent years has created alternative ways to participate in the global labour market. India has achieved success in sectors with higher labour intensity but lower infrastructure/ capital intensity, such as software and IT enabled services, pharmaceuticals, gems and jewellery and garments. Presently India has a share of 1.3% in global trade of commercial services (excluding remittances from Indians working aboard) compared to its share of only 0.8% in global trade of goods. Table -1 Global supply of science and engineering students graduating in 1999 (in 000) Country Natural Science* Engineering Total 1. Global 918 868 1786 2. EU 182 135 317 3. USA 144 61 205 4. China 60 195 255 5. India 147 350 176 6. Japan 33 103 136 7. Indonesia 11 21 31 8. South Korea 30 45 75 9. Taiwan 13 17 30 10. Thailand 10 11 21 * Includes physics, chemistry, astronomy, biology, mathematics, agricultural and computer sciences.

51

Table-2 Workers’ remittances received by developing countries in 2001 Country US$ billion Share in total (%) 1. 1. India 10.0 13.8 2. Mexico 9.9 13.7 3. Philippines 6.4 8.9 4. Morocco 3.3 4.6 5. Egypt, Arab Rep of 2.9 4.0 6. Turkey 2.8 3.9 7. Lebanon 2.3 3.2 Source: World Bank 2003.

There is heated debate on substantial brain drain from India. Currently there are about 20 million non-resident Indians (NRIs) of which 1.7 million are settled in the USA. Other favored destinations are the UK, Africa, the Middle East and Malaysia. However, on considering substantial remittances, investment and deposits by the NRIs, free movement of technical people had been beneficial to India. In 2001, India received the highest amount of remittances from workers amongst developing countries (Table-2). High remittances helped India to have surplus on current accounts since 2002-03. NRIs have a share of about 20% in stock of Foreign Direct Investment (FDI) in India. NRI deposits of foreign exchange with the domestic banks are major sources of foreign exchange reserves with the RBI and helped India to tackle the economic sanctions imposed by developed countries after the nuclear test in 1998.

52

Table-2 INDIA- Macro-economic Trends: 1999-2007 I T E MS 1999 Actual

2000 Actual

2001 Actual

2002 Actual

[Update: 10 November 2004] 2003 2004 2005 2006 Estimate Projected Projected Projected

POPULATION (Mn; as on Oct 1) 1001 GR Population % 1.83 NATIONAL ACCOUNTS (Rupees Bn;fy) GDP by industry (at const.1993/94 fc) 11484 Agriculture 2870 Industry 3063 Manufacturing 1919 Non-manufacturing 1144 Services 5550 GDP at constant 1993/94 factor cost 11484 Consumption of fixed capital 1291 NDP at factor cost 10193 Net factor income from abroad -112 GNP at constant factor cost 11372 NNP at constant factor cost 10081 Indirect taxes less subsidies 1179 GDP at constant 1993/94 market prices 12663 GNP at constant 1993/94 market prices 12551 GDP (const.fc) sectoral shares 100 Agriculture 25.0 Industry 26.7 Services 48.3

1019 1.80

1037 1.77

1055 1.70

1072 1.60

11986 2867 3264 2062 1202 5855 11986 1361 10625 -116 11870 10509 1176 13162 13046 100 23.9 27.2 48.9

12678 3053 3375 2137 1238 6251 12678 1425 11253 -80 12598 11173 1162 13840 13760 100 24.1 26.6 49.3

13183 2894 3592 2270 1322 6697 13183 1501 11682 -115 13068 11567 1293 14476 14361 100 22.0 27.2 50.8

14245 3158 3825 2432 1393 7262 14245 1593 12652 -115 14130 12537 1397 15642 15527 100 22.2 26.9 51.0

GNP growth rate at constant fc GDP growth rate at constant mp GDP growth rate at constant fc GR agriculture GR industry GR manufacturing GR non-manufacturing GR services GDP at current mp (Rupees Bn;fy) Net factor income from abroad GNP at current mp (Rupees) NNP at current mp

6.2 7.1 6.1 0.3 4.8 4.0 6.2 10.1 19368 -154 19214 17390

4.4 3.9 4.4 -0.1 6.5 7.4 5.1 5.5 20895 -173 20722 18743

6.1 5.2 5.8 6.5 3.4 3.6 3.0 6.8 22821 -121 22701 20523

3.7 4.6 4.0 -5.2 6.4 6.2 6.8 7.1 24696 -192 24503 22153

GDP at current mp (mn US$) GNP at current mp (mn US$) NNP at current mp (mn US$)

446968 443406 401323

457377 453593 410275

478518 475984 430325

43.33 96.74 74.22 153 3.8 153 3.4

45.68 100.76 73.77 159 3.8 159 3.8

47.69 102.09 73.18 165 3.9 165 3.9

Average Exchange Rate (Rupees/US$) REER (1993-94=100, 5 country) NEER (1993-94=100, 5 country) Implicit GDP deflator (1993/94=100) GR GDP deflator Implicit GNP deflator (1993/94=100) GR GNP deflator

53

1088 1.50

2007 Projected

1104 1.50

1120 1.50

1137 1.50

15093 3095 4097 2609 1488 7901 15093 1660 13433 -135 14958 13298 1480 16573 16438 100 20.5 27.1 52.4

16127 3157 4397 2805 1592 8573 16127 1774 14353 -140 15987 14213 1581 17708 17568 100 19.6 27.3 53.2

17280 3251 4727 3015 1712 9302 17280 1901 15379 -145 17135 15234 1694 18974 18829 100 18.8 27.4 53.8

18579 3381 5105 3256 1848 10092 18579 2044 16535

8.1 8.1 8.1 9.1 6.5 7.1 5.4 8.4 28124 -219 27905 25228

5.9 6.0 6.0 -2.0 7.1 7.3 6.8 8.8 31825 -248 31577 28548

6.9 6.8 6.8 2.0 7.3 7.5 7.0 8.5 35364 -276 35088 31723

7.2 7.2 7.2 3.0 7.5 7.5 7.5 8.5 39408 -307 39101 35351

44065 -343 43722 39528

510294 506318 457751

612037 607268 549017

691845 686454 620608

753706 747834 676100

823437 817022 738651

902691 895658 809744

48.40 97.88 68.78 171 3.5 171 3.4

45.95 99.60 67.36 180 5.4 180 5.3

46.00 100.80 66.14 192 6.8 192 6.9

46.92 100.00 65.48 200 4.0 200 4.0

47.86 100.00 64.82 208 4.0 208 4.0

48.82

-150.0 18429 16385 1822 20400 20250 100 18.2 27.5 54.3 7.6 7.5 7.5

4.0 8.0

8.0 8.0 8.5

100.00 64.18 216 4.0 216 4.0

INDIA- Macro-economic Trends: 1999-2007 I T E MS CPI :Ind.Workers 1982=100 GR : Consumer Price Index WPI :1993/94=100 GR: Wholesale Price Index Expend. on GDP;Current mp;Rs.Bn Total consumption Private consumption Government consumption Total investment Gross fixed cap. Formation Increase in stocks Exports of goods and services Less: imports of goods and services Statistical discrepancy Investment financing: curr.mp;Rs.Bn gross domestic capital formation -- Private sector -- Public sector Gross domestic saving -- Household sector -- Private corporate sector -- Public sector+A101 GR GDS GR GDI GR Total Consumption GDI as % of GDP -- Private sector -- Public sector GDS as % of GDP -- Household sector -- Private corporate sector -- Public sector Resource gap (GDS-GDI) GDI as % of GNP GDS as % of GNP Resource gap (GDS-GDI) Per Capita GDP (Rupees): Current market prices Constant 1993/94 factor cost GR per capita GDP at constant fc Per Capita NNP at constant 1993/94 fc GR per capita NNP at constant fc Per Capita GNP (Rupees): Current market prices Constant 1993/94 market prices GR per capita constant GNP

[Update: 10 November 2004]

1999 Actual

2000 Actual

2001 Actual

428 3.4 145.3 3.3 19368 15188 12677 2511 4907 4219 364 2277 2657 -346

444 3.8 155.7 7.2 20895 16229 13586 2642 5088 4592 135 2902 3061 -263

463 4.3 161.3 3.6 22821 17753 14910 2843 5279 5004 86 3076 3218 -69

482 4.0 166.9 3.5 24696 19021 15933 3088 5750 5552 86 3759 3853 19

500 3.9 175.9 5.4 28124 21234 17718 3515 6630 6430 200 4061 3660 -141

525 5.0 187.9 6.8 31825 24028 20050 3978 7535 7285 250 4855 4434 -159

546 4.0 195.4 4.0 35364 26700 22279 4420 8869 8569 300 5707 5382 -530

568 4.0 203.2 4.0 39408 29753 24827 4926 10454 10104 350 6581 6395 -985

4907 3562 1345 4687 4044 843 -200 25.1 24.8 12.7 25.3 18.4 6.9 24.2 20.9 4.4 -1.0 -1.1 25.5 24.4 -1.1

5088 3773 1315 4960 4582 861 -484 5.8 3.7 6.9 24.4 18.1 6.3 23.7 21.9 4.1 -2.3 -0.6 24.6 23.9 -0.6

5279 3949 1330 5352 5190 788 -627 7.9 3.8 9.4 23.1 17.3 5.8 23.5 22.7 3.5 -2.7 0.3 23.3 23.6 0.3

5750 4346 1404 5977 5593 842 -457 11.7 8.9 7.1 23.3 17.6 5.7 24.2 22.6 3.4 -1.9 0.9 23.5 24.4 0.9

6630 4973 1658 7031 6328 984 -281 17.6 15.3 11.6 23.6 17.7 5.9 25.0 22.5 3.5 -1.0 1.4 23.8 25.2 1.4

7535 5651 1884 7956 7001 1114 -159 13.2 13.6 13.2 23.7 17.8 5.9 25.0 22.0 3.5 -0.5 1.3 23.9 25.2 1.3

8869 6652 2217 9195 7957 1238 0 15.6 17.7 11.1 25.1 18.8 6.3 26.0 22.5 3.5 0.0 0.9 25.3 26.2 0.9

10454 7841 2614 10640 8867 1576 197 15.7 17.9 11.4 26.5 19.9 6.6 27.0 22.5 4.0 0.5 0.5 26.7 27.2 0.5

12254 9191 3064 12338 10135 1763 441 16.0 17.2 11.8 27.8 20.9 7.0 28.0

19349 11472 4.2 10071 4.3

20505 11762 2.5 10313 2.4

22007 12226 3.9 10774 4.5

23417 12500 2.2 10968 1.8

26247 13294 6.4 11700 6.7

29262 13878 4.4 12227 4.5

32036 14609 5.3 12875 5.3

35172 15422 5.6 13596 5.6

38747 16336 5.9 14407 6.0

19195 12538 5.3

20336 12803 2.1

21891 13269 3.6

23234 13617 2.6

26043 14491 6.4

29034 15115 4.3

31786 15915 5.3

34898 16805 5.6

38445 17806 6.0

54

2002 2003 2004 2005 2006 Estimate Projected Projected Projected Projected

2007 Projected 591 4.0 211.3

4.0 44065 33269 27761 5508 12254 11904

350 7585 7501 -1542

23.0 4.0 1.0 0.2 28.0 28.2 0.2

INDIA- Macro-economic Trends: 1999-2007 I T E MS 1999 Actual BALANCE OF PAYMENTS (US$ Mn; fy) Merchandise exports, fob 37542 Merchandise imports, cif 55383 Trade balance -17841 Other goods, services and income 505 Non factor services 4064 Investment income -3559 Unrequited income 12638 Private transfers 12256 Official transfers 382 Net invisibles 13143 GR invisibles 42.7 Current account balance & off. Transfer -4698 Growth rates: Fiscal Year Merchandise exports 9.5 Merchandise imports 16.5 Capital inflows (US$ million; fy) 10840 External assistance,net 901 External commercial borrowings, net 313 Direct foreign investment 2157 Portfolio investment 3024 IMF, net -260 NRI deposits, net 1540 Other capital, net 3165 Change of reserves [increase (-) ] -6142 Foreign exchange reserves ($ mn, end 38036 fy) Foreign Reserves (in months of imports) 8.2 As % of GDP at current mp: Merchandise exports 8.4 Merchandise imports 12.4 Current balance -1.1 MONEY AND BANKING (Rs.Bn; end fy) Narrow money supply (M1) 3418 Currency with the public 1891 Demand deposits 1497 Other deposits with RBI 30 Time deposits with banks 7824 Broad money supply (M3) 11242 Foreign assets (net) 2056 Domestic credit 10279 Claims on govt. Sector 4414 Claims on private sector 5866 Govt's currency liabilities to the public 46 less, banking sector's non-monetary 1140 liabl. Broad money supply (M3) 11242 GR M1 10.6 GR M3 14.6

[Update: 10 November 2004] 2003 2004 2005 2006 Estimate Projected Projected Projected

2000 Actual

2001 Actual

2002 Actual

44894 59264 -14370 -2354 2478 -4832 13134 12798 336 10780 -18.0 -3590

44915 57618 -12703 976 4577 -3601 12509 12125 384 13485 25.1 782

52512 65422 -12910 1830 6765 -4935 15217 14807 410 17047 26.4 4137

62952 79658 -16706 5981 10684 -4703 19444 18885 559 25425 49.1 8719

75542 96386 -20844 8500 13000 -4500 21500 21000 500 30000 18.0 9156

89140 114700 -25560 9000 14000 -5000 23500 23000 500 32500 8.3 6940

102511 133625 -31114 9500 15000 -5500 25500 25000 500 35000 7.7 3886

117888 153669 -35781 10000 16000 -6000 27500 27000 500 37500 7.1 1719

19.6 7.0 9420 410 3737 3272 2590 -26 2317 -2880 -5830 42281

0.0 -2.8 10975 1117 -1576 4741 1951 0 2754 1988 -11757 54106

16.9 13.5 12843 -2460 -2344 3611 944 0 2976 10116 -16980 71086

19.9 21.8 22702 -2661 -1853 3137 11355 0 3628 9096 -31421 102507

20.0 21.0 10650 1800 850 3500 1000 0 -1000 4500 -19806 122313

18.0 19.0 14000 1000 1000 4000 2500 0 500 5000 -20940 143254

15.0 16.5 13500 500 -500 4500 3000 0 1000 5000 -17386 160640

15.0 15.0 15500 500 -1000 5000 4000 0 2000 5000 -17219 177859

8.6

11.3

13.0

15.4

15.2

15.0

14.4

13.9

9.8 13.0 -0.8

9.4 12.0 0.2

10.3 12.8 0.8

10.3 13.0 1.4

10.9 13.9 1.3

11.8 15.2 0.9

12.4 16.2 0.5

13.1 17.0 0.2

3795 2096 1663 36 9338 13132 2498 11912 5120 6792 54 1331

4228 2408 1792 29 10755 14984 3110 13492 5896 7596 64 1683

4736 2716 1988 32 12444 17180 3937 15755 6765 8990 71 2583

5767 3155 2560 51 14265 20031 5266 17634 7455 10179 73 2942

6812 3628 3124 60 16119 22931 6846 20117 7902 12215 74 4106

7950 4136 3748 65 18198 26148 8899 23350 8693 14658 75 6177

9283 4715 4498 70 20546 29829 11569 27151 9562 17589 76 8967

10848 5375 5398

13132 11.0 16.8

14984 11.4 14.1

17180 12.0 14.7

20031 21.8 16.6

22931 18.1 14.5

26148 16.7 14.0

29829 16.8 14.1

34044 16.9 14.1

55

2007 Projected

75 23196 34044 15040 31625 10518 21107 77 12698

INDIA- Macro-economic Trends: 1999-2007 I T E MS

1999 Actual

Central govt.finance(Rs.Bln.fy) Current revenue 1815 Taxes 1283 Non-taxes including external grants 532 Current expenditure, of which 2491 Interest payments 902 Current surplus(+)/deficit(-) -676 Capital receipts, of which 1157 Recovery of loans 101 Disinvestment of govt.equity in PSUs 17 Govt. borrowings & other liabilities 1039 Capital expenditure 490 Capital a/c surplus(+)/deficit(-) 667 Budget deficit (-)/ Surplus (+) -9 Gross Fiscal Deficit(-)/Surplus(+) -1047 Primary deficit (-) -145 Financing of gross fiscal deficit (Rs.Bln): Domestic borrowing 1018 Foreign borrowing and grants 12 Others (use of cash balances) 9 Note:Borrowing & other liabilities 1039 As percentage of GDP at current mp Govt. exp. (current+capital) 15.4 Total revenue (current+capital) 15.3 Gross fiscal balance -5.4 Revenue balance -3.5 Primary balance -0.7 As percentage of GNP at current mp Govt. exp. (current+capital) 15.5 Total revenue (current+capital) 15.5 Gross fiscal deficit -5.4 States finance combined (Rs.Bln) Fiscal deficit (+) 915 Primary deficit (+) 463 Budget deficit (+) 31 Revenue deficit (+) 538 States finance combined (% of GDP) Fiscal deficit (+) 4.7 Primary deficit (+) 2.4 Budget deficit (+) 0.2 Revenue deficit (+) 2.8 Centre & States combined (% of GDP) Fiscal deficit (+) 9.5 Primary deficit (+) 3.9 Budget deficit (+) 0.2 Revenue deficit (+) 6.3

[Update: 10 November 2004] 2000 Actual

2001 Actual

2002 Actual

2003 Actual

1926 1367 559 2778 993 -852 1342 120 21 1200 478 864 12 -1188 -195

2013 1335 678 3015 1075 -1002 1625 164 36 1425 608 1017 15 -1410 -335

2317 1594 723 3396 1178 -1079 1824 342 32 1451 745 1079 0 -1451 -273

2630 1875 755 3629 1246 -999 2112 646 145 1321 1114 999 0 -1321 -75

3093 2339 754 3855 1295 -762 1685 271 40 1374 923 762 0 -1374 -79

3490 2690 800 4250 1350 -760 1765 300 40 1425 1005 760 0 -1425 -75

3943 3093 850 4575 1400 -632 1895 350 45 1500 1263 632 0 -1500 -100

1137 75 -12 1200

1383 56 -15 1425

1533 -135 53 1451

1285 36 0 1321

1354 20 0 1374

1400 25 0 1425

1475 25 0 1500

1550

15.6 15.6 -5.7 -4.1 -0.9

15.9 15.9 -6.2 -4.4 -1.5

16.8 16.8 -5.9 -4.4 -1.1

16.9 16.9 -4.7 -3.6 -0.3

15.0 15.0 -4.3 -2.4 -0.2

14.9 14.9 -4.0 -2.1 -0.2

14.8 14.8 -3.8 -1.6 -0.3

14.7 14.7 -3.6 -1.1 -0.3

15.7 15.8 -5.7

16.0 16.0 -6.2

16.9 16.9 -5.9

17.0 17.0 -4.7

15.1 15.1 -4.4

15.0 15.0 -4.1

14.9 14.9 -3.8

14.8 14.8 -3.6

895 378 -23 536

960 335 -26 592

1021 321 -44 552

1404 567 123 722

1123 206 5 483

4.3 1.8 -0.1 2.6

4.2 1.5 -0.1 2.6

4.1 1.3 -0.2 2.2

5.0 2.0 0.4 2.6

3.5 0.6 0.0 1.5

9.5 3.6 -0.1 6.6

9.9 3.7 -0.1 7.0

9.5 3.1 -0.2 6.6

9.4 2.9 0.4 6.2

7.9 1.7 0.0 4.0

56

2004 2005 2006 Estimate Projected Projected

2007 Projected 4457 3557

900 4925 1460 -468 2020

400 45 1575 1552 468 0 -1575 -115

25 0 1575

INDIA- Macro-economic Trends: 1999-2007 I T E MS 2000 Actual

2001 Actual

2002 Actual

2003 Actual

[Update: 10 November 2004] 2004 2005 2006 2007 Actual Projected Projected Projected

External Debt (US$ Mn. End-March) Total outstanding and disbursed Long-term, of which Government debt Non-government debt Short-term (all on non-govt account)

98263 94327 46852 47475 3936

101132 97504 44027 53477 3628

98757 96012 43619 52393 2745

104869 100300 43716 56584 4569

112593 107857 44303 63554 4736

114507 109507 46103 63404 5000

117257 112007 47103 64904 5250

118507 113007 47603 65404 5500

Total debt servicing Principal repayments Interest payments (LT, ST) Exports & gross invisibles (XGS)

11543 7059 4484 67472

12821 8359 4462 79342

10863 6776 4087 81220

14407 10843 3564 95475

20949 16949 4000 114332

17000 12500 4500 125765

14000 9500 4500 138342

14000 9000 5000 152176

167393

17.1 2.6 22.0 262 4.0 47.7

16.2 2.8 22.1 225 3.6 43.5

13.4 2.3 20.6 220 2.8 44.2

15.1 2.8 20.6 200 4.4 41.7

18.3 3.4 18.4 179 4.2 39.3

13.5 2.5 16.6 152 4.4 40.3

10.1 1.9 15.6 132 4.5 40.2

9.2 1.7 14.4 116 4.6 40.2

9.3 1.7 13.3 102 4.8 40.0

1999 Actual

2000 Actual

2001 Actual

2002 Actual

8.4 12.4 -4.0 0.1 0.9 -0.8 2.8 2.7 0.1 2.9 -1.1

9.8 13.0 -3.1 -0.5 0.5 -1.1 2.9 2.8 0.1 2.4 -0.8

9.4 12.0 -2.7 0.2 1.0 -0.8 2.6 2.5 0.1 2.8 0.2

10.3 12.8 -2.5 0.4 1.3 -1.0 3.0 2.9 0.1 3.3 0.8

10.3 13.0 -2.7 1.0 1.7 -0.8 3.2 3.1 0.1 4.2 1.4

10.9 13.9 -3.0 1.2 1.9 -0.7 3.1 3.0 0.1 4.3 1.3

11.8 15.2 -3.4 1.2 1.9 -0.7 3.1 3.1 0.1 4.3 0.9

12.4 16.2 -3.8 1.2 1.8 -0.7 3.1 3.0 0.1 4.3 0.5

13.1 17.0 -4.0 1.1 1.8 -0.7 3.0 3.0 0.1 4.2 0.2

2.4 0.2 0.1 0.5 0.7 -0.1 0.3 0.7 -1.4 8.5 1.2

2.1 0.1 0.8 0.7 0.6 0.0 0.5 -0.6 -1.3 9.2 1.3

2.3 0.2 -0.3 1.0 0.4 0.0 0.6 0.4 -2.5 11.3 1.4

2.5 -0.5 -0.5 0.7 0.2 0.0 0.6 2.0 -3.3 13.9 0.9

3.7 -0.4 -0.3 0.5 1.9 0.0 0.6 1.5 -5.1 16.7 2.4

1.5 0.3 0.1 0.5 0.1 0.0 -0.1 0.7 -2.9 17.7 0.7

1.9 0.1 0.1 0.5 0.3 0.0 0.1 0.7 -2.8 19.0 0.9

1.6 0.1 -0.1 0.5 0.4 0.0 0.1 0.6 -2.1 19.5 0.9

1.7 0.1 -0.1 0.6 0.4 0.0 0.2 0.6 -1.9 19.7 1.0

Debt-service ratio (to XGS in per cent) Debt-service to GDP ratio (per cent) Debt/GDP ratio (in per cent) Debt/exports ratio (in per cent) Short-term debt/ Total Debt ratio (%) Govt external debt/ Total Debt ratio (%) I T E MS Memo Items: As per cent of GDP at current mp: Merchandise exports, fob Merchandise imports, cif Trade balance Other goods, services and income Non factor services Investment income Unrequited income Private transfers Official transfers Net invisibles Current account balance & official transfer Total capital inflows, net External assistance, net External commercial borrowings, net Direct foreign investment Portfolio investment IMF, net NRI deposits, net Other capital, net Change in reserves [increase (-)] Foreign exchange reserves at end year Total foreign investment

57

2003 2004 2005 2006 Estimate Projected Projected Projected

2008 Projected 120257 114507 48103 66404

5750 15500

9500 6000

2007 Projected

INDIA- Macro-economic Trends: 1999-2007 I T E MS 1999 Actual

2000 Actual

2001 Actual

2002 Actual

Memo Items: As per cent of GDP at current mp: Expenditure on GDP;Current mp; Rs.Bn Total consumption Private consumption Government consumption Total investment Gross fixed cap. Formation Increase in stocks Exports of goods and services Less: imports of goods and services Statistical discrepancy

100.0 77.7 65.0 12.6 24.4 22.0 0.6 13.9 14.6 -1.3

100.0 77.8 65.3 12.5 23.1 21.9 0.4 13.5 14.1 -0.3

100.0 77.0 64.5 12.5 23.3 22.5 0.3 15.2 15.6 0.1

100.0 75.5 63.0 12.5 23.3 22.9 0.7 14.4 13.0 -0.5

100.0 75.5 63.0 12.5 23.6 22.9 0.8 15.3 13.9 -0.5

100.0 75.5 63.0 12.5 23.7 24.2 0.8 16.1 15.2 -1.5

100.0 75.5 63.0 12.5 25.1 25.6 0.9 16.7 16.2 -2.5

100.0 75.5 63.0 12.5 26.5 27.0 0.8 17.2 17.0 -3.5

MONEY AND BANKING (As % of GDP at current mp): Narrow money supply (M1) 17.6 18.2 Currency in circulation 9.8 10.0 Demand deposits 7.7 8.0 Other deposits with RBI 0.2 0.2 Time deposits with banks 40.4 44.7 Broad money supply (M3) 58.0 62.8 Foreign assets (net) 10.6 12.0 Domestic credit 53.1 57.0 Claims on govt. Sector 22.8 24.5 Claims on private sector 30.3 32.5 Govt's currency liabilities to the public 0.2 0.3 Less, banking sector's non-monetary 5.9 6.4 liabl. Broad money supply (M3) 58.0 62.8

18.5 10.6 7.9 0.1 47.1 65.7 13.6 59.1 25.8 33.3 0.3 7.4

19.2 11.0 8.0 0.1 50.4 69.6 15.9 63.8 27.4 36.4 0.3 10.5

20.5 11.2 9.1 0.2 50.7 71.2 18.7 62.7 26.5 36.2 0.3 10.5

21.4 11.4 9.8 0.2 50.6 72.1 21.5 63.2 24.8 38.4 0.2 12.9

22.5 11.7 10.6 0.2 51.5 73.9 25.2 66.0 24.6 41.4 0.2 17.5

23.6 12.0 11.4 0.2 52.1 75.7 29.4 68.9 24.3 44.6 0.2 22.8

24.6 12.2 12.2 0.2 52.6 77.3 34.1 71.8 23.9 47.9 0.2 28.8

65.7

69.6

71.2

72.1

73.9

75.7

77.3

8.8 5.9 3.0 13.2 -4.4 7.1 0.7 0.2 6.2 2.7 4.5 15.9 0.1 -6.2

9.4 6.5 2.9 13.8 -4.4 7.4 1.4 0.1 5.9 3.0 4.4 16.8 0.0 -5.9

9.4 6.7 2.7 12.9 -3.6 7.5 2.3 0.5 4.7 4.0 3.6 16.9 0.0 -4.7

9.7 7.3 2.4 12.1 -2.4 5.3 0.9 0.1 4.3 2.9 2.4 15.0 0.0 -4.3

9.9 7.6 2.3 12.0 -2.1 5.0 0.8 0.1 4.0 2.8 2.1 14.9 0.0 -4.0

10.0 7.8 2.2 11.6 -1.6 4.8 0.9 0.1 3.8 3.2 1.6 14.8 0.0 -3.8

10.1 8.1 2.0 11.2 -1.1 4.6 0.9 0.1 3.6 3.5 1.1 14.7 0.0 -3.6

100.0 78.4 65.5 13.0 25.3 21.8 1.9 11.8 13.7 -1.8

CENTRAL GOVT. FINANCE (As % of GDP at current mp): Current revenue 9.4 9.2 Taxes 6.6 6.5 Non-taxes including external grants 2.7 2.7 Current expenditure 12.9 13.3 Current surplus (+)/deficit (-) -3.5 -4.1 Capital receipts 6.0 6.4 Recovery of loans 0.5 0.6 Disinvestments of govt.equity in PSUs 0.1 0.1 Govt. borrowings & other liabilities 5.4 5.7 Capital expenditure 2.5 2.3 Capital a/c surplus(+)/deficit(-) 3.4 4.1 Total expenditure 15.4 15.6 Budget deficit (-)/ Surplus (+) 0.0 0.1 Gross Fiscal Deficit(-)/Surplus(+) -5.4 -5.7

58

[Update: 10 November 2004] 2003 2004 2005 2006 Estimate Projected Projected Projected

2007 Projected

INDIA- Macro-economic Trends: 1999-2007 I T E MS 1995 Actual Finance of Centre & States (Rs.Bn) Total expenditure Expenditure on social sector Education Health Others As percentage of GDP: Total expenditure Expenditure on social sector Education Health Others As % of total expenditure: Expenditure on social sector Education Health Others As % of expend. On social sector Education Health Others Memo item: GDP at current mp (Rupees billion)

[Update: 10 November 2004] 2001 2002 2003 Actual Actual RE

1998 Actual

1999 Actual

2000 Actual

2931 781 346 143 292

4654 1282 588 267 427

5428 1471 623 256 593

5865 1618 657 279 681

6534 1767 687 298 782

7261 2059 748 342 970

8853 2450 860 380 1210

8988 2580 915 425 1240

24.7 6.6 2.9 1.2 2.5

26.7 7.4 3.4 1.5 2.5

28.0 7.6 3.2 1.3 3.1

28.1 7.7 3.1 1.3 3.3

28.6 7.7 3.0 1.3 3.4

29.4 8.3 3.0 1.4 3.9

31.5 8.7 3.1 1.4 4.3

28.2 8.1 2.9 1.3 3.9

26.6 11.8 4.9 9.9

27.6 12.6 5.7 9.2

27.1 11.5 4.7 10.9

27.6 11.2 4.8 11.6

27.1 10.5 4.6 12.0

28.4 10.3 4.7 13.4

27.7 9.7 4.3 13.7

28.7 10.2 4.7 13.8

44 18 37

46 21 33

42 17 40

41 17 42

39 17 44

36 17 47

35 16 49

35 16 48

11880

17410

19368

20895

22821

24696

28124

31825

59

2004 BE

Domestic Debt of the centre and state combined at end March: Item

2000

2001

2002

2003

2004

2005

Domestic debt combined (Rs.billion) Centre State

13827 9626 4201

16007 11026 4981

18815 12949 5867

21857 14996 6861

24828 16771 8057

28420 19311 9109

External debt combined (Rs.billion) Centre State

2044 2044 0

2052 2052 0

2130 2130 0

2019 2019 0

1834 1834 0

1735 1735 0

Total govt. debt combined (Rs.billion) Centre State

15871 11670 4201

18059 13078 4981

20946 15079 5867

23876 17015 6861

26662 18605 8057

30155 21046 9109

Domestic debt as % of GDP (combined) Centre State

71.4 49.7 21.7

76.6 52.8 23.8

82.4 56.7 25.7

88.5 60.7 27.8

88.3 59.6 28.6

89.3 60.7 28.6

External debt as % of GDP (combined) Centre State

10.6 10.6 0.0

9.8 9.8 0.0

9.3 9.3 0.0

8.2 8.2 0.0

6.5 6.5 0.0

5.5 5.5 0.0

Total govt.debt as % of GDP (comb) Centre State

81.9 60.3 21.7

86.4 62.6 23.8

91.8 66.1 25.7

96.7 68.9 27.8

94.8 66.2 28.6

94.8 66.1 28.6

Interest payments combined (Rs.billion) Centre State

1105 902 202

1247 993 254

1424 1075 349

1584 1178 406

1800 1246 554

1917 1295 622

Revenue receipts combined (Rs.billion) Centre State

3437 1815 1623

3788 1926 1862

4002 2014 1987

4505 2317 2187

5292 2630 2662

6054 3093 2961

Interest payment as % GDP Centre State

5.7 4.7 1.0

6.0 4.8 1.2

6.2 4.7 1.5

6.4 4.8 1.6

6.4 4.4 2.0

6.0 4.1 2.0

Interest payment as % revenue Centre State

32.1 49.7 12.5

32.9 51.6 13.6

35.6 53.3 17.6

35.2 50.8 18.6

34.0 47.4 20.8

31.7 41.9 21.0

60

2006

2007

2008