CONTENTS 1. STATE OF THE ECONOMY 1 Economic growth during 2008-09 2 Aggregate demand and its composition 4 Globalization of the Indian economy 8 Summing-up 14 2. CHALLENGES, POLICY RESPONSE AND MEDIUM-TERM PROSPECTS 15 Global developments and the Indian economy, 2008-09 16 Some aspects of India's recent growth dynamics and prospects 23 Sustaining the growth momentum-some aspects of the policy agenda 28 Summing-up 34 3. FISCAL DEVELOPMENTS AND PUBLIC FINANCE 35 Central Government finances 36 Economic and functional classification of Central Government Budget 50 Performance of the departmental enterprises of the Central Government 56 Finances of State Governments 57 Challenges and outlook 61 4. PRICES AND MONETARY MANAGEMENT 63 Prices 63 Domestic and global scenarios 73 GDP consumption deflator 77 Housing price index 77 Monetary developments 80 Challenges and outlook 93 5. FINANCIAL INTERMEDIATION AND MARKETS 95 Bank credit 95 Rural infrastructure development fund 99 Credit to agriculture 101 Financial performance of banks 106 Financial institutions 108 Capital and commodity markets 111 Insurance and pension funds 121 Challenges and outlook 124 6. EXTERNAL SECTOR 126 Balance of payments 127 Current account 128 Capital account 133 World merchandise trade 138 India's merchandise trade 140 Services trade 144 Foreign exchange reserves 148 Foreign exchange rate policy 149 External debt 152 Direction and composition of trade 156 Trade policy 160 WTO negotiations and India 168 Bilateral and regional cooperation 169 Challenges and outlook 170 7. AGRICULTURE AND FOOD MANAGEMENT 171 Allied sectors 183 Marketing and extension 190 Challenges and outlook 199 8. INDUSTRY 200 Developments that impacted the industrial sector 200 Industrial growth by sectors 204 Growth by product groups 204 Sector-wise growth profile 205 Central public sector enterprises 212 Financing and investment by sectors 214 Policy developments and programmes 216 Some critical dimensions of industrial development 220 222 Challenges and outlook 9. ENERGY, INFRASTRUCTURE AND COMMUNICATIONS 224 Overview of performance 224 Transmission, trading, access and exchange 228 Reforms in distribution 231 Petroleum and gas 232 Coal 235 Railways 236 Roads 239 Civil aviation 242 Ports 244 Telecommunications 245 Posts 248 Urban infrastructure 249 Financing of infrastructure 253 258 Challenges and outlook 10. HUMAN DEVELOPMENT, POVERTY AND PUBLIC PROGRAMMES 259 Human development and gender situation 259 Poverty and inclusive growth 259 Hunger and malnutrition 262 Employment 264 Trend in social sector expenditure 266 Social sector initiatives 268 Education 270 Health 272 Women and child development 275 Social welfare 276 Social security and related programmes 279 Climate change 280 Outlook and challenges 281