India’s economy may see an industrial resurgence, as the sector climbs from a 2.7 percent low in 2001/02 to 10 percent this year, according to research from Industrial Info Resources.
However, the country’s Finance Minister P. Chidamabaram said that due to rising fuel prices and gas shortages, power generation has been suffering with only half of the targeted generation capacity reached from 2002 to 2007. As a result, state utilities lost more than $6 billion in 2006/07, up from the $4.8 billion loss in 2005/06, the report said.
For the current fiscal year, gross subsidies increased 10 percent to $9.1 billion and the rate of return of utilities dropped to -27.4 percent from -24.8 percent in 2005/06, the research showed.
The survey said that a reduction in transmission and distribution losses from 40 percent to 15 percent is necessary to improve the utilities sector.
The survey also notes that a high rate of investment has been boosting growth in the industrial sector from 31.5 percent in 2004/05 to 33.8 percent in 2005/06. Moreover, the December 2006 foreign direct investment (FDI) increased to $2.04 billion from $350 million in December 2005.
In the current fiscal year, $12 billion FDI is expected, up from the $5.5 billion last year, according to Industrial Info.
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