The deceleration has been the most pronounced in mining and manufacturing among the broad sectors though electricity generation has recorded a higher growth than the previous year. Among the use-based industry categories, basic, intermediate and consumer goods have dipped sharply but capital goods have performed relatively better.

Low growth has been particularly noticeable in certain key industries like crude oil, steel, coal, cement, commercial vehicles, food products and textiles among others. The slowdown is particularly evident in infrastructure as well in six infrastructure industries (electricity, coal, steel, cement, crude oil and refining) registering only 2 per cent growth in April-December 1998.

The Survey notesthat after reaching a peak in 1995-96 (12.8 per cent), industrial growth slowed down considerably in 1996-97 (5.5 per cent) and registered a marginal improvement (6.6 per cent) in 1997-98. However, thereafter, the downward growth trend has continued.

Among the factors which caused the industrial slowdown on the domestic front were a decline in agricultural production in 1997-98, affecting rural incomes, which directly resulted in lower demand for certain industrial products, particularly mass consumption goods like food products, textiles etc. In addition, capital markets (both primary and secondary) have remained depressed for the past couple of years, drying up source of investment for industry.

The Vajpayee Government continued with industrial reforms in 1998-99. Coal and lignite, petroleum (other than crude) and its distillation products, bulk drugs and sugar were delicensed. At present, only five items of health, strategic and security considerations, remain under the purview of industriallicensing.

The Survey notes that the base for the index of industrial production has been shifted to a more recent period of 1993-94. The new series was released on May 26, 1998.

The industrial investment scenario in the current year was relatively subdued. Investment intentions filed through Industrial Entrepreneurs memorandum (IEM) and the letter of intent (LI) have noticeable declined since 1996. During January-November 1998, the number of intentions filed through IEMs and LIs was 2,674 for proposed investment of Rs 54,284 crore compared to 3,884 proposed investment of Rs 55,680 crore in January-November 1997.

Trends in foreign investment have also shown deceleration. The amount of FDI proposals approved in January-October 1998 at Rs 24,454 crore is lower than Rs 46,658 crore approved during the corresponding period in the previous year. Cumulative foreign investment approved amounted to Rs 1,75,032 crore and actual inflow (Rs 51,558 crore) constitutes 29.5 per cent of the approved amount.

FDI hasshown a distinct preference for the core sector. The core and infrastructure sector has accounted for FDI worth Rs 1,01,002 crore till the end of September 1998, contributing 57.9 per cent of total approvals since August 1991. The share of consumer goods in total FDI has been 13.2 per cent, followed by services (9.9 per cent) and capital goods (9.7 per cent).