Despite recently-voiced fears of economists of a slowdown in the GDP growth rate in the second half of this fiscal due to soaring food inflation and a slowdown in manufacturing activity, a leading economic research agency has forecast that the economy will grow by a robust 9.2 per cent.
"The economy is expected to better the H1 (first-half) growth of 8.9 per cent in H2. We expect a higher 9.7 per cent growth in H2, propelled by the farm sector coupled with the trade, transport, communications and hotel segments of the services sector," the Centre for Monitoring the Indian Economy (CMIE) has said in its monthly review of the economy for January.
It further said performance of the other segments of the services sector like finance, insurance and realty will also improve on the back of strong credit offtake.
At the same time, the CMIE warned that corporate India is expected to report only a seven per cent rise in net profits due to a slowdown in profit growth of the manufacturing sector during 2010-11. This is much lower than the 29 per cent growth in net profits clocked in the previous fiscal.
The main culprit behind the slowdown in profit growth will be the manufacturing sector. Its net profits are expected to fall by 2.1 per cent in 2010-11 as the companies try to absorb the sharp increase in raw material prices and wage bills, the CMIE report said.
On the other hand, the financial services and non-financial services sectors are expected to report 24.6 per cent and 12.5 per cent increase in net profits respectively, it said.