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Indian Economic Policy

Notes Table 1 : Annual Average Growth Rate of Industrial Production
(Use-based Classification)
Per cent
Sector 1981-82 to 1990-91 1995-96 to 2009-10
a. Basic Goods 7.0 5.2
b. Capital goods 11.5 10.7
c. Intermediate Goods 5.9 6.3
d. Consumer Goods 6.7 7.1
(i) Durables 13.9 9.2
(ii) Non-durables 5.5 6.4
General Index 7.8 6.7

Source : Computed from RBI, Handbook of Statistics on Indian Economy, (2009-10)
5. Performance of Public Sector Enterprises
Information about the performance of the much-maligned Central Public Enterprises, reveals
that gross profit as percentage of capital employed was 11.61 per cent in 1993-94, 15.88 per cent
in 1995-96 and then to 21.5 per cent in 2004-05. A similar trend was observed in net profit,
which was of the order of 2.84 per cent in 1993-94 but improved to 12.1 percent in 2005-06.
Value added per unit of capital which indicates the efficiency of capital employed also showed
an improvement from 0.26 in 1993-94 to 0.44 in 2001-02. Obviously, Central Public Sector
Enterprises have shown better perfor-mance during the 12-year period of reform (1993-94 to
2005-06). The basic question which needs to be raised is : If the ground realities indicate better
performance of the Central Public Sector Enterprises, is it desirable to undertake disinvestment
of these enterprises ? Would it not be better to introduce reform of public sector enter-prises so
that they can improve their performance still further. By 2005-06, the Government had signed
Memo-randum of Understanding (MOU) with 102 PSEs. Evaluation of their performance reveals
that 44 were rated as excellent, 36 very good and 14 as good. If 94 PSEs out of 102 have shown
an improvement, there is a case for innovating measures to improve performance of PSEs,
rather than giving them a bad name and hang them.
6. Economic Reforms and Movement of WPI and CPI
If we leave out the first two years of the post-reform period assuming them to be teething
troubles and compare the relative movement of prices for the 11-years period (1993-94 to 2004-
05), then the following objective reality is indicated.
Rise of prices affects the labour classes adversely as against the capitalist classes who gain
disproportionately with a rise of prices. The movement of wholesale price index (WPI) reveals
that in the pre-reform period (1981-82 to 1991-92), the annual average increase in WPI was of
the order of 6.9 per cent and in the post-reform period (1993-94 to 2009-10), it was of the order
of 6.21 percent. Obviously, the situation in the rise of WPI improved during the post-reform
period.
But a better index of measuring welfare would be to study the movement of Consumer Price
Index (CPI). The data reveal that CPI for Industrial Workers (CPI-IW) indicated an annual
average rise of 7.1 per cent for the period 1993-94 to 2010-11 which is higher than increase of
WPI. Similarly. CPI for Agricultural labourers (CPI-AL) increased annually by 6.9 per cent in
the post-reform period which also indicates a relatively higher increase than WPI.
The upshot of the analysis is that in the post-reform period (1993-94 to 2009-10), the movement
of the CPI was slightly higher than the movement of WPI. This indicates that retail inflation in
post-reform period was slightly higher than wholesale inflation.

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