Growth of agricultural crop production, which averaged over 4 per cent per annum during 1992-93 to 1994-95, slowed to 0.9 per cent in 1995-96. Foodgrains production which had risen to a new peak of 191.1 million tonnes in 1994-95 may also be marginally lower at 190.4 million tonnes in 1995-96, because of a decline in wheat output. Public food stocks which peaked at a high of 35.6 million tonnes in July 1995, declined because of open market sales by the Food Corporation of India. In April 1996, at 22.7 million tonnes, they remain, however, over 50 per cent larger than the buffer stock norm. Reform of customs tariffs, trade policy and the exchange rate system have substantially reduced the bias against agriculture and thus improved the relative profitability of agriculture. More directly, increases in procurement and minimum support prices of foodgrains and freeing of some controls on domestic and international trade in agricultural commodities have improved incentives and widened the opportunities open to farmers. During the year 1995-96, 5.6 million tonnes of rice were exported. All this has contributed to an improvement in the terms of trade for agriculture. Studies by the Commission on Agricultural Cost and Prices show that the index of terms of trade (with base 1969-72) improved significantly from 89.9 in 1990-91 to 98.7 in 1994-95.
Investment in agriculture remains an area of concern and could be a significant part of the explanation for the recent growth slowdown. Though improved incentives for the agricultural sector as a whole have played a role in generating an average growth in crop production of 3.4 per cent per annum during the past four years, the slowdown of production growth to 0.9 per cent in 1995-96, despite a normal monsoon, is a cause for concern.
One significant problem confronting agriculture, namely the distorted pattern of farmgate prices for three kinds of fertilizer (nitrogenous, phosphatic and potassic) was addressed in early July, 1996 through increases in the subsidy (per tonne) of phosphatic and potassic fertilizers. This should help in moving the NPK application pattern from the current distorted ratio of 9:3:1 towards the more ideal pattern of 4:2:1.
The strength of industrial growth throughout 1995-96 has been confirmed by data which has become available since the Economic Survey 1995-96 was written. The acceleration in growth has been maintained, with the growth of 9.3 per cent in 1994-95 followed by 12.4 per cent during 1995-96 (April-February, over corresponding period of the previous year). The capital goods sector maintained its position as an important contributor to the industrial surge with a growth rate of 20.4 per cent during 1995-96 (April-February), on top of the 1994-95 growth of 24.9 per cent (Table 3). Industrial growth has not only been high during the last two years but has also been broad-based. In 1994-95, the growth of 9.3 per cent in the general index of industrial production (IIP) was due to a growth of 9.7 per cent in manufacturing, 8.5 per cent in electricity generation and 7.3 per cent in mining and quarrying. During April-February, 1995-96, overall growth of 12.4 per cent was due to a growth of 13.9 per cent in manufacturing, 8.3 per cent in electricity and 7.4 per cent in mining. A similar growth profile is mirrored in the "use-based classification", where this overall growth in April-February, 1995-96 has come from a 20.4 per cent growth in capital goods, 12.9 per cent growth in consumer goods, 9 per cent growth in basic goods and 10.3 per cent in intermediate goods.
Though the performance of the core sector, which was quite satisfactory during 1994-95, has been sustained in 1995-96, a few areas of potential concern have emerged. In 1995-96 electricity, coal, steel, cement, crude oil and petroleum products, with a combined weight of 28.8 per cent in IIP, showed a growth rate of 7.7 per cent, compared with 7.8 per cent in 1994-95 (Table 4). Electricity generation grew by 8.2 per cent, crude oil by 7.2 per cent, coal by 6.4 per cent, saleable steel by 8.9 per cent and cement by 11.2 per cent. The rates of growth of coal and cement have accelerated, while those of electricity and crude oil have declined, in both 1995-96 and 1996-97 (April-May). The IIP for electricity generation shows a sharp drop in annual (point-to-point) growth from August-September 1995 onwards, dropping to 5.1 per cent in the third quarter of 1995-96, but recovering marginally to 5.8 per cent in January-February 1996. Electricity generation has continued to decline in 1996-97, with only a 3.6 per cent growth in April-May 1996. Though the deceleration of growth in 1995-96 and 1996-97 is due primarily to reduced hydro-electric generation (-12.5 per cent and -16.2 per cent respectively), this again points to the urgency of power sector reform. Crude oil production actually declined by 7.7 per cent in April-May 1996-97 over the corresponding period of 1995-96. Infrastructure sectors not included in the IIP showed satisfactory performance in 1995-96, with new telephone connections growing by 20.8 per cent, cargo handled at major ports by 9 per cent and revenue generating traffic of the railways by 7 per cent. During 1996-97 (April-May), the growth rates of these sectors have been 16.1 per cent, 11.1 per cent and 7.4 per cent, respectively.