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8/8/2019 Union Budget2010-2011
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yPresentation on Union
Budget: 2010-11y& Current Fiscal Situation
By prof- SC sharma
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y
Budget as a statement of incomeand expenditure of thegovernment.
yBudget as a summary of taxchanges and allocation ofresources to finance various
schemes.
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yThe Budget is a report card on what
the Government has done onmeasures to:1. Raise growth rate2. Reduce the number of the poor3. Creating infrastructure4. Raising capital expenditure.
yBudget is not merely tinkering with a
few tax rates.
3
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y
Budget should focus on long term fiscalissues such as:
1. Level of Fiscal deficit
2. Sustaining high rate of economic growth,savings and investment levels.
3. Supporting growth in capital expenditure
4. Creating favourable investment Climate for
corporate sector.
4
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FRBM Act (August 2003) and Its
Obligations
yAppropriate measures to
reduce fiscal deficit and revenuedeficit so as to eliminaterevenue deficit by 31st March2008 and thereafter build upadequate revenue surplus.
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y
Fiscal deficit to GDP ratio tobe 3% by 31.08.2008
y
RBI primary marketpurchases of GOI bondswould cease on 01.04.2006
6
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Trends in deficits of Central Government as % of GDP
Year Revenue Deficit FiscalDeficit
Revenue deficit as
per cent of fiscaldeficit
1996-97 2.4 4.1 58.2
1999-00 3.5 5.4 64.6
2002-03 4.4 5.9 74.4Enactment of FRBM
2003-04 3.6 4.5 79.7
2004-05 2.5 4.0 62.6
2005-06 2.6 4.1 63.02006-07 1.9 3.5 56.3
2007-08 1.1 2.7 41.4
2008-09 (RE) 4.5 6.1 73.9
2009-10 5.0 6.870.0
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Receipts and expenditure of the Central Government(As per cent of GDP)
2003-04 2006-07 2007-08 2008-09
(R.E.)
1. RevenueReceipts 9.6 10.5 11.5 10.6
2. RevenueExpenditure 13.1 12.5 12.6 15.1
3. Revenue Deficit 3.6 1.9 1.1 4.5
4. Capital Receiptsof which 7.5 3.6 3.6 6.4
(a) Borrowings4.5 3.5 2.7 6.1
5. CapitalExpenditure
4.01.7 2.5 1.8
6. Fiscal deficit 4.5 3.5 2.7 6.1 8
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Sources of tax revenue
Tax revenue as a percentage of gross tax
revenue
1995-96 2005-06 2007-082008-09
(RE)
Direct 30.2 45.1 49.9 54.9
Indirect 69.1 54.4 47.0 44.8
Tax revenue as a percentage of gross domesticproduct
1995-96 2005-06 2007-082008-09
(RE)
Direct 2.8 4.6 6.3 6.5
Indirect 6.4 5.6 5.9 5.3 9
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BUDGET AT A GLANCE (Rs. Cr.)
2007-08Actuals
2008-2009Revised
Estimates
2009-2010Budget
Estimates
1. Revenue
Receipts 541864 562173 6144972. CapitalReceipts
of which 170807 338780 406341
3. Borrowings 126912 326515 400996
4. TotalReceipts 712671 900953 1020838
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Gross Borrowings (Rs. Crore)
2005 - 06 131000
2006 - 07 1460002007 - 08 168101
2008 - 0 (R ) 306000
200 - 10 (B ) 4510 312
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13
Salient features of the budget
Focus on inclusive growth in ruralareas
Significant increase in
expenditure on rural schemes
(Bharat Nirman & NREGP)
Aims at pushing up consumptionexpenditure of masses in rural
areas
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Increase in social spending
for shaping socio-political
environment
Does not focus on stock
markets
Dominant role for publicsector
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Does not depend on FDI &
FII for supporting growthstrategy.
No further support tohousing and real estate
sector.Disconnect with corporate
world.
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Gover ent endit reon r tir n ( . rore)
2005 - 06 121602006 - 0 1 6 6
200 - 0 24603
200 - 0 312 0200 - 10 45356
llocation to r ral-focus* flagshi
schemes ( s. rore)200 - 0 ' 36130
200 - 0 '' 50150
200 - 10' 62230 16
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Education
(in Rs. Cr.)2003-04 2.2% 10,145
2004-05 2.6% 13,098
2005-06 3.5% 17,8102006-07 4.0% 23,810
2007-08 3.8% 27,185
2008-09 (Revised) 4.2% 37,367
2009-10 (Budget) 4.4% 44,528
Figures in brackets are % of total17
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Health
(in Rs. Cr.)2003-04 1.5% 7,249
2004-05 1.6% 8,089
2005-06 1.9% 9,6502006-07 2.0% 10,948
2007-08 2.0% 14,410
2008-09 (Revised) 2.1% 18,476
2009-10 (Budget) 2.2% 22,641
Figures in brackets are % of total18
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Roads & Highways
(in Rs. Cr.)2003-04 1.5% 7,237
2004-05 1.5% 7,248
2005-06 2.2% 11,153
2006-07 2.3% 13,220
2007-08 2.1% 14,840
2008-09 (Revised) 1.8% 16,045
2009-10 (Budget) 1.9% 19,565
Figures in brackets are % of total19
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Areas of Concern
High and growing fiscal deficityFiscal Deficit as % of GDP 2009-10
yCentral Government = 6.8%
yState Government = 4%
yOff Budget items = 2%
yTotal = 12.8%
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y Rising debt to GDP ratio
The debt-to-GDP ratio which isalready at 83% could raise fears ofeither a debt default or blowing off
the real value of the debt throughresultant inflation. Both these willadversely influence long-termprivate investment plans.
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Revenue deficit
reachingalarming levels
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No road map for fiscal
consolidation
No policy announcement on
disinvestment.
More effort on spending
and borrowings. No efforton resource mobilization
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Implications of high level of
fiscal deficit:Monetization of deficit
Generation and strengthening ofinflationary forces
Crowding out effects for private
investmentPressure on interest rates to go up
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25
All India break-up of Monthly Per Capita Expenditure
by item (Expenditure Rs/person)
Items Rural UrbanMilk & Milk Products 51 85
Vegetables 38 50
Fruits 12 26
Beverages & processed foods 26 68
Food (total) 333 468
Clothing & Footwear 45 76
Education 17 73
Medical 44 71
Durable Goods 22 47
Non-Food (total) 291 703
Source: National Sample Survey Report on Household
Consumer
Expenditure in India, 2005-06.
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Institutional Investments (Rs cr) Since Budget
2009-10
ate et FIIInvestment et IIInvestment
13-Jul-09 -559 742
10-Jul-09 -903 886
9-Jul-09 -546 578
8-Jul-09 -828 594
7-Jul-09 -921 790
6-Jul-09 -1483 816
Total -5241 4406
Source: BSE/ SE
websites
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Receipts and disbursements ofStateGovernmentsa
(As per cent of GDP)2003-04 2005-06 2006-07 2007-
08(RE)
2008-09
(BE)
1. Total Receipts 18.7 16.6 16.3 16.2 16.8
2. TotalDisbursements
18.7 15.7 15.9 16.7 16.8
3. RevenueDeficit 2.3 0.2 -0.6 -0.5 -0.5
4. Gross fiscaldeficit
4.4 2.5 1.9 2.3 2.1
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International Comparison
Minimum RateIndia 10%
Brazil 7.5%
China 5%US 10%
UK 20%
South Africa 18%
Malaysia 1%
Pakistan 0.25% 28
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International Comparison
Maximum RateIndia 30%Brazil 27.5%
China 45%US 50%
UK 50%
South Africa 40%
Malaysia 28%
Pakistan 20% 29
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Values of Key Macro-economic Parameters
Investment
Rate
Gross
Domestic
Fixed
Capital
Formation
Domes
tic
Saving
s
Rate
Curre
nt
Accou
nt
Balan
ce
Domest
ic
Saving
s
Rate
Final
Consumption
Rate
Gross
Domestic
Capital
Formation
(GDCF)
GDCF in
Fixed Capital
only
Final Consumption
Expenditure
Priva
te
Gov
t.
otal Pvt.
Corp.
otal Pvt.
Corp
.
Priva
te
Go
vt.
otal
Ratio to GDP at market prices Growth rate at Constant Prices
2000/01 * 24.3 22.7 23.7 0.6 23.7 64.0 12.6 -4.0 28.3 -0.01 -
11.0
3.6 0.9 3.2
2001/02 * 22.8 23.6 23.5 0.7 23.5 64.5 12.4 3.8 8.6 7.4 3.6 5.7 2.3 5.2
2002/03 * 25.2 23.8 26.3 1.2 26.3 63.3 11.9 10.9 17.1 6.8 3.5 2.8 -0.4 2.3
2003/04 * 27.6 25.0 29.8 2.3 29.8 61.8 11.3 12.9 24.6 13.6 23.2 6.0 2.6 5.5
2004/05 32.7 28.8 32.2 0.3 32.2 59.5 11.0 22.3
*
68.1* 18.9* 62.8
*
5.5* 3.6
*
5.2*
2005/06 34.3 30.4 33.1 1.2 33.1 58.2 10.9 16.0 44.1 15.3 41.7 8.6 8.3 8.5
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Values of Key Macro-economic Parameters
Investment
Rate
Gross
Domestic
Fixed
Capital
Formatio
n
Domesti
c
Savings
Rate
Current
Accoun
t
Balance
Domesti
c
Savings
Rate
Final
Consumption
Rate
Gross
Domestic
Capital
Formation
(GDCF)
GDCF in
Fixed Capital
only
Final Consumption
Expenditure
Private Govt. Total Pvt.
Corp.
Total Pvt.
Corp.
Private Govt. Total
Ratio to GDP at market prices Growth rate at Constant Prices
2006/0
7
35.5 31.4 34.4 1.0 34.4 57.8 10.4 16.1 20.2 14.3 18.7 8.3 3.8 7.6
2007/0
8
37.7 33.0 36.4 1.3 36.4 57.1 10.4 15.2 23.0 15.2 20.6 9.6 9.7 9.6
2008/0
9 QE
34.9 33.0 32.5 2.4 32.5 57.9 11.7 -2.4 -16.6 4.0 -5.1 6.8 16.7 8.3
2009/1
0 est.
36.2 33.0 34.0 2.2 34.0 57.8 12.1 5.2 7.5 5.2 5.0 4.2 8.2 4.9
2010/1
1 proj.
37.3 33.7 35.2 2.1 35.2 56.0 10.8 15.0 20.0 12.8 15.0 6.8 3.1 6.2
2011/1
2
proj.
38.2 35.0 36.1 2.1 36.1 55.5 10.3 12.7 14.4 12.8 15.0 8.0 4.0 7.4
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Trends in Industrial OutputUnit per cent
General Manufacture Electricity Mining Basic
goods
Capital
Goods
Intermed
iate
goods
Total Consum
er
Goods2007/08 Durable
s
Non
durable
s
Q1 10.3 11.1 8.3 2.7 9.4 19.1 9.3 9.0 -0.7 12.4
Q2 8.7 8.9 7.1 7.4 9.3 21.3 10.5 2.2 -5.5 5.1
Q3 8.3 8.9 4.6 5.5 5.0 20.8 8.9 6.2 2.1 7.6
Q4 6.7 7.3 5.5 5.2 4.7 12.2 7.1 6.8 0.1 8.9
2008/09
Q1 5.3 5.8 2.0 4.0 3.1 7.9 2.6 8.6 3.5 10.1
Q2 4.7 4.9 3.2 3.8 4.7 13.2 -1.7 6.6 10.8 5.1
Q3 0.8 0.5 2.9 2.0 2.4 3.8 -5.8 3.3 -1.8 4.9
Q4 0.8 0.3 3.0 0.9 0.4 5.0 -3.2 1.2 5.6 -0.1
2009/10
Q1 3.8 3.4 6.0 6.8 6.3 2.0 7.4 -0.5 15.6 -5.3
Q2 9.0 9.2 7.4 9.0 5.9 8.6 11.7 10.1 23.7 5.1
Q3 13.1 14.3 4.5 9.5 5.9 21.6 18.7 11.9 33.8 5.2
Q4 F 13.6 14.6 6.1 9.6 9.3 24.8 18.0 10.0 27.5 4.633
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DOWN A SLIPPERY SLOPE
*Revenue deficit
(RD)
*Gross fiscal
deficit (GFD)
RD/GFD
2004-05 3.99 2.49 62.4
2005-06 4.08 2.57 62.9
2006-07 3.45 1.94 56.2
2007-08 2.69 1.11 41.3
2008-09 4.50 6.00 75.0
2009-10(RE) 5.30 6.70 79.1
2010-11 (BE) 4.00 5.50 72.7
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Balance of Payments
Unit: US$ billion2004-05 2005/06 2006/07 2007/08 2008/09 2009/10
Apr-Sep Oct-Mar Total
O/W
Software &
BPO
14.7 23.8 27.7 37.2 44.5 17.2 30.0 47.2
Private
Remittances
20.5 24.5 29.8 41.7 44.6 26.7 30.0 55.7
Investment
Income
-4.1 -4.1 -6.8 -4.4 -4.0 -2.1 -2.0 -4.1
CurrentAccount
Balance
-2.5 -9.9 -9.6 -15.74 -28.7 -18.6 -10.9 -29.5-0.3 -1.2 -1.0 -1.3 -2.4 -2.2
Foreign
Investment
13.0 15.5 14.8 45.0 3.5 32.1 15.2 47.3
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Balance of Payments
Unit: US$ billion2004-05 2005/06 2006/07 2007/08 2008/09 2009/10
Apr-Sep Oct-Mar TotalO/W FDI
(net)
3.7 3.0 7.7 15.4 17.5 14.1 6.0 20.1
Inbound FDI 6.0 8.9 22.7 34.2 35.0 21.0 15.0 36.0
Outbound
FDI
2.3 5.9 15.0 18.8 17.5 6.8 9.0 15.8
PortfolioCapital
9.3 12.5 7.1 29.6 -14.0 17.9 9.2 27.2
Loans 10.9 7.9 24.5 41.9 4.1 0.7 6.5 7.2
Banking
Capital
3.9 1.4 1.9 11.8 -3.2 1.2 3.8 4.9
Other Capital 0.7 1.2 4.2 9.5 4.5 -4.3 -6.5 -10.8
Capital
Account
Balance
28.0 25.5 45.2 108.0 8.7 29.6 19.0 48.5
3.9% 3.0% 4.8% 8.8% 0.7% 3.7%
Errors &
Omissions
0.6 -0.5 1.0 1.2 1.1 -1.4 -1.4
Accretion to
Reserves
26.2 15.1 36.6 92.2 -18.9 9.5 8.1 17.6
3.6% 1.8% 3.9% 7.5% -1.5% 1.3%37
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Fund Raising from Banking System and Capital Market
Rs in Crore 2007/08 2008/09 Apr-Sep
2008/09
Apr-Sep
2009/10
Oct-Jan
2008/09
Oct-Jan
2009/10
Apr-Jan
2009/09
Apr-Jan
2009/10
1 Bank
Sources of
Funds
1.1 Increase in
Credit to
CommercialSector
446,299 431,393 202,948 110,901 83,740 165,551 286,688 276,452
1.2 Increase in
Bank holding
of Govt.
securities
187,861 195,333 8,871 208,505 189,024 33,925 197,895 242,430
2 Capital
Market-All
Sources
241,156 224,072 68,432 146,908 95,787 92,243 164,219 239,151
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Fund Raising from Banking System and Capital Market
Rs in Crore 2007/08 2008/09 Apr-Sep
2008/09
Apr-Sep
2009/10
Oct-Jan
2008/09
Oct-Jan
2009/10
Apr-Jan
2009/09
Apr-Jan
2009/10
2.1 Debt
(bonds)$
128,602 209,164 55,947 102,968 94,026 71,874 149,974 174,842
2.2 Capital
Market
Equity
Raising
(a+b+c)
112,554 14,908 12,484 43,940 1,760 20,369 14,245 64,309
A IPO and
FPO (public)
54,511 2.082 2,032 15,081 26 6,952 2,059 22,033
B QIP** 25,525 189 75 26,181 114 12,963 189 39,144
C Rights 32,518 12,637 10,377 2,679 1,620 453 11,997 3,132
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Select sectoral investment growth rates at 2004-05 prices
Rate of growth of GCF
2005-0 200 -0 200 -0 200 -0
Mining &
Quarrying 40.0 3.5 14. - .
Manufacturing 14. 25.5 1 . -21.
Registered 3 .1 1 . 24.4 -1 .
Unregistered -40. 1.5 1.4 -42.5
Electricity, Gas &
Water Supply 2 . 23. . 1.3
Construction 0. 45.5 23.5 -22.
Banking &
Insurance 4 .3 3 .3 1.4 -1 .0
Other Services 20. 10.2 1 .4 3.0
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Thank
You
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Rate of growth at factor cost at1999-2000 price (per cent)
2003-04 2006-07 2007-08 2008-09
Agriculture, Forestry& fishing
10.0 4.0 4.9 1.6
Manufacturing 6.6 11.8 8.2 2.4
Electricity, gas &water supply
4.8 5.3 5.3 3.4
Construction 12.0 11.8 10.0 7.2
Financing, insurance,real estate &business services
5.6 13.8 11.7 7.8
Total GDP at factor
cost8.5 9.7 9.0 6.7
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Composition of Revenue Expenditure(As per cent)
InterestPay-ment
MajorSub-
sidies
DefenceExpend
-iture
2003-04 34.3 12.0 11.9
2004-05 33.0 11.6 11.4
2005-06 30.2 10.1 11.0
2006-07 29.2 10.4 10.0
2007-08 28.8 11.4 9.1
2008-09 24.0 15.3 9.245
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Key indicators of Indian Economy
Items Units 2003-04 2007-08 2008-09
1. GDP and related indicators
GDP (current
market price)Rs. Crore
275462
0
472340
0
5321753R
E
Growth Rate % 8.4 9.1 6.1
Savings Rate % of GDP 29.8 37.7 na
2. Prices
Inflation (WPI)(52- weekaverage)
% Change 5.5 4.7 8.4
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Items Units2003-
042007-
082008-
09
3. ternal Sector
port growth(UG$)
% Change 21.1 28.9 3.6
Import growth(US$)
% Change 27.3 35.4 14.4
Current accountdeficit(CAD)/GDP
Percent 2.3 -1.5 -4.1
Foreign
e changereserves
US$ bn. 113.0 309.7 252.0 @
4. Fiscal indicators (Centre)
Gross fiscal
deficit % of GDP 4.5 6.2 ##47
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Total Expenditure (Rs.
Crore)2005 - 06 505738
2006 - 07 583387
2007 - 08 712671
2008 - 09 (RE) 900953
2009 - 10 (BE) 102083848
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Total Recipts (Rs. Crore)
2005 - 06 506123
2006 - 07 581637
2007 - 08 680521
2008 - 09 (RE) -2009 - 10 (BE) -
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Demand side growth in GDP, growthcontribution and relative share
(figures in per cent at 1999-00 market prices)
2006-07
2007-08
2008-09
DGDP at market
prices9.7 9.1 6.1
Consumption (pvt.) 6.3 8.5 2.9
Consumption (Govt.) 5.5 7.4 20.2
Gross fixed capitalformation
14.5 12.9 8.2
Export 21.1 2.1 12.8
Import 24.5 6.9 17.9 50
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Ratio of savings and investment to GDP(% at current market price)
2003-04
2005-06
2006-07
2007-08
Gross
domesticsaving
29.8 34.2 35.7 37.7
Public Sector 1.1 2.4 3.3 4.5
Private Sector 28.7 31.8 32.4 33.2
HouseholdSector
24.1 24.1 24.1 24.3
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2003-04
2005-06
2006-07
2007-08
Gross capitalformation(investment)
27.6 35.5 36.9 39.1
Public Sector 6.3 7.6 8.0 9.1
Private Sector 19.6 26.1 27.2 28.5
CorporateSector
6.8 13.7 14.8 15.9
HouseholdSector
12.7 12.4 12.4 12.6
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Sector investment growth rates(at constant 1999-00 prices)
2003-04 2006-07 2007-08
Agriculture,Forestry &
fishing
-3.8 10.9 8.2
Manufacturing 22.5 17.8 13.3
Registered 13.9 16.3 17.3
nregistered 41.6 21.9 2.9
Electricity, gas &water supply
22.8 15.2 3.6
C t ti 27 6 25 4 16 1 53