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STATE PROFILES ANDHRA PRADESH

1ECONOMIC CHALLENGE FOR CHIEF MINISTERS IN 2012

Achieving Fiscal StabilityEnhancing State CompetitivenessCompetitiveness is the only way to achieve sustainable job growth, improving incomes and stable public financesCreating a clear economic strategy for the state that engages all stakeholders is even more important in times of budget cutting and austerity2

HIERARCHY OF MEASUREMENT OF STATE COMPETITIVENESS INDEX* Approximate figureSTAGES OF THE ECONOMY

City States (Per capita GDP>1300 USD)CategorizationMicroeconomic Competitiveness RanksCity States (Per capita Incomes >1300 USD)Delhi1Goa2Innovation Driven Economies (Per capita Incomes 900 to1300 USD)Haryana1Maharashtra2Gujarat3Kerala4Transition Economies (Per capita Incomes 800 to 900 USD) Punjab1Tamil Nadu2Himachal Pradesh3Investment Driven Economies (Per capita Incomes 500 to 800 USD)Andhra Pradesh1Karnataka2Uttarakhand3West Bengal4Chhattisgarh5Sikkim6Mizoram7Meghalaya8Arunachal Pradesh9Tripura10Evolving/ Changeover Economies (Per capita Incomes 400 to 500 USD) Rajasthan1Jharkhand2Orissa3Jammu and Kashmir4Factor Driven Economies(Per capita Incomes < 500 USD) Bihar1Madhya Pradesh2Assam3Uttar Pradesh4Manipur5Nagaland6STATES ACCORDING TO CATEGORIZATIONSource: Institute for Competitiveness Analysis

NEAR TERM STATE PROSPERITY PERFORMANCE

Gross Domestic Product per Capita, 2011Gross Domestic Product per Capita real growth rate, 2008-2011All India Average 57.28 Index PointsAll India GSDP /Capita rate (CAGR) of 6.27 %All India Average of 47,998 Rupees/capitaHighly Productive and Prosperity Rising versus IndiaHigh but declining versus IndiaLow but rising versus IndiaLow and declining versus India6COMPETITIVENESS: UNDERLYING CONCEPTS

Competitiveness is the productivity with which a state utilizes its human, capital, and natural resourcesProductivity determines wages and the standard of living Productivity growth determines sustainable economic growthProductivity depends on how a state competes, not what industries it competes inInnovation in products and processes is necessary to drive productivity growthOnly productive businesses can create wealth and jobs. States compete to offer the most productive environment for businessThe public and private sectors play different but interrelated roles in creating a productive economy7ANDHRA PRADESH PERFORMANCE SNAPSHOT

Top 33.33% of the states 33.33%-66.67% of the states66.67% to 100% of the statesPositionTrendProsperityProductivityLabour MobilizationState of ClustersLeading ClustersTextiles ApparelsProcessed Food Type of EconomyInvestment Driven8Labour Mobilization

Population, 2011 Rank: 2In Andhra Pradesh 8,46,66,533% of India4.98%

Population Growth, GAGR, 2001-2011 Rank: 10 In Andhra Pradesh 1.06% In India1.61%

Employment, 2010 Rank: 2In Andhra Pradesh 20808940% India7.31%

Employment growth, annual rate, 2000-2010 Rank: 10In Andhra Pradesh 1.43%In India 2.05%

Unemployment, 2010 (Per hundred People) Rank: 7 In Andhra Pradesh 7.60In India9.39

Change in Unemployment rate, 2000-2010 Rank: 6 In Andhra Pradesh 0 % In India41.37Clusters

Total Number of People employed in all Factory sector Rank: 1In Andhra Pradesh 11,13,149In India1,15,06,838State Employment to total India Employment (factory sector)9.83% Productivity

Gross State Domestic Product per labour force participant, 2011 Rank: 4In Andhra Pradesh Rs 1,25,040.In IndiaRs 1,21,265State Difference to India+3.11%

Growth in Gross State Domestic Product Rank: 2per Labour force participant, 2001-11 In Andhra Pradesh 10.43% In India8.44%

Average Private Wage in 2008-09, Rank: 6In Andhra Pradesh Rs 53,575In IndiaRs 64,741State Difference to India-17.25.%

Private Wage Growth, CAGR, 2000-2009 Rank:2In Andhra Pradesh 7.66%In India4.53%Prosperity

Gross State Domestic Product per Capita, 2011 Rank: 2 In Andhra Pradesh Rs. 49,149 In IndiaRs. 47,998State Difference to India +2.40%.

Growth in Gross State Domestic Product per Capita, 2008-11 , (CAGR) Rank: 2 In Andhra Pradesh 7.29% In India 6.28%ANDHRA PRADESH COMPETITIVENESS OVERALL PERFORMANCE INDICATORS

9

GSDP at current price at factor cost in Rupees CroreUNDERSTANDING STATE ECONOMIC PERFORMANCESource : Institute for Competitiveness Analysis10

GSDP at current price at factor cost in Rupees CroreCONTRIBUTION OF ANDHRA PRADESHS GSDP TO INDIAN GSDP Source : Institute for Competitiveness AnalysisDec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Ratio of Andhra Pradesh's GSDP to Indian GDP in Percentage Terms7.568.068.128.028.078.028.027.978.128.238.238.1911WHAT DRIVES STATE PRODUCTIVITY

1. Overall business climate conducive to growth

2. Stage of Economy (strong clusters)

3. Proper Policy enactment and strong rule of law

12MODEL USED FOR ANALYSIS

Climate for Innovation based local rivalryClusters of Related and Supporting IndustriesDemand Conditions

Local rules and incentives that encourage investment and productivity e.g.salaries, incentives for capital investments, intellectual property protectionVigorous local competition i.e., Openness to foreign and local competition; Sophistication of company operationsLocal availability of suppliers and supporting industriesPresence of clusters instead of isolated firmsSophisticated and demanding local customers and needs e.g.,- Strict quality, safety, and environmental standards Consumer protection laws Government procurement ofadvanced technology Early demand for products andServices.Access to high quality business inputs i.e., - Natural endowments,- Human resources, - Capital availability,- Physical infrastructure,- Administrative infrastructure,- Information infrastructure, - Scientific and technological infrastructureFactor Conditions

Source: Michael E Porter13IMPROVING PRODUCTIVITY IN BUSINESS ENVIRONMENT

Key Issues for StatesMore power in terms of tax sharing with centerReduce costs of doing businessDeveloping training programs which meet the specific needs of the state industrial clustersFocus on infrastructure investments on the most leveraged areas for productivity and economic growthImplementing policies to support small growth businessesEnhancing the states skill development and training institutions for the same Relentlessly improve of the public education system, the essential foundation14

NationNeighboring statesStatesCity RegionsRural RegionsGEOGRAPHIC INFLUENCES ON COMPETITIVENESS Influence and access federal policies and programsIntegrate policies and infrastructure with neighborsAssist each city area in developing its own strategyConnect rural regions with urban areas 15CONTRIBUTION OF AGRICULTURE SECTOR TO GSDP

GSDP at current price at factor cost in Rupees CroreDec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Ratio of Agricultural GSDP in Andhra Pradesh to the total GSDP in Andhra Pradesh in Percentage terms28.8329.8628.3625.8126.9725.8325.3723.8425.4626.3425.3425.01Source : Institute for Competitiveness Analysis16CONTRIBUTION OF MANUFACTURING SECTOR TO GSDP

GSDP at current price at factor cost in Rupees CroreDec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Ratio of Manufacturing GSDP in Andhra Pradesh to the total GSDP in Andhra Pradesh in Percentage terms12.5311.3811.5312.0812.0812.4311.9511.8911.4510.7310.5611.02Source : Institute for Competitiveness Analysis17CONTRIBUTION OF SERVICE SECTOR TO GSDP

GSDP at current price at factor cost in Rupees CroreDec-00Dec-01Dec-02Dec-03Dec-04Dec-05Dec-06Dec-07Dec-08Dec-09Dec-10Dec-11Ratio of Services GSDP in Andhra Pradesh to the total GSDP in Andhra Pradesh in Percentage terms47.4247.3848.9350.3749.8149.4948.9448.7447.2147.8148.8748.40Source : Institute for Competitiveness Analysis18

COMPOSITION OF ANDHRA PRADESHS ECONOMYSource : Institute for Competitiveness Analysis19GSDP in Rs. CroreIndian contribution Andhra Pradeshs contribution

COMPOSITION OF ANDHRA PRADESHS ECONOMYSource : Institute for Competitiveness AnalysisAndhra Pradesh/National GSDP share (Percent) ,2011Change in contribution of GSDP of Andhra Pradesh to total Indian GSDP, CAGR (2000-2011)

COMPOSITION OF ANDHRA PRADESHS ECONOMY IN GREATER DEPTHSource : Institute for Competitiveness Analysis21STATE PRIVATE WAGE PERFORMANCE

Average Wage : Rupees 64,741Wage Growth rate 4.53%Average Wages in Rupees ,2009Source : Institute for Competitiveness Analysis, Data as of 201022LABOUR PRODUCTIVITY

All India Average 57.28 Index PointsAll India Average of of 1,21,265 Rupees/Labour force participantAll India Average of 8.44%GSDP /Labor force participant growth rate(CAGR)GSDP at Current Prices per labour force participant, 2011 High but declining versus IndiaHighly productive and Productivity rising versus IndiaLow but rising versus India Low and declining versus India Source : Institute for Competitiveness Analysis23LONG TERM JOB GROWTH

Number of Job

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