New
Delhi: In its latest quarterly report on the State
of Indian Economy (SOE), the Confederation Of Indian
Industry (CII) forecasts India's economic growth faces
a moderate downturn owing to rising interest rates,
rising prices of oil imports and inflation.
Though
the report acknowledges that the low weightage of fuel
prices and interest rates may lead only to a marginal
effect on overall costs. However, these two factors
may affect the performance of the corporate sector from
the demand side, the report said.
Comparing
the performance of 3018 companies during Q3 of 2005-06
with that of Q3 of 2004-05 CII noted a decline in the
growth of net sales by about 9 per cent on account of
an increase in expenses.
The
growth rate for the current fiscal was projected at
8 per cent before the rate of inflation began increasing.
The growth rate in the previous fiscal was 8.4 per cent,
thanks to the revival of agricultural growth after years.
Agricultural growth in the last fiscal was 3.9 per cent.
Despite
these drags on the economy, the report indicates that
8 per cent growth would still be achievable if the monsoons
turn out to be normal and agriculture repeats its last
year's performance. Moreover, India would also benefit
from the faster growth of the major global economies
are growing.
CII's
prediction of a slowdown comes on the back of a decline
in the growth of the industry and services sector in
the January-March 2005 period, which registered 8.2
per cent and 10.9 per cent respectively. CII also notes
that the manufacturing sector improved its to 8.9 per
cent in Q4 of 2005-06 from 8.1 per cent in 2004-05,
while power output improved by 6.1 per cent.
However,
despite these, the 'index of industrial production'
fell to 8.2 per cent during Q4, 2005-06 from 8.4 per
cent in 2004-05. Mining growth dropped to 3 per cent
during Q4, 2005-06 from 3.7 per cent a year back.
The
report expresses concern over the drop in the already
low growth rate of intermediate sector and apprehends
that this could lead to an upward pressure on material
inputs of the corporate sector, affecting its profitability.
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