CII predicts 7.3% growth in 2005-06

The Confederation of Indian Industry (CII) has predicted that the economy will clock an impressive 7.3 per cent GDP growth for the fiscal 2005-06, riding on strong prospects of kharif production and reasonably buoyant industrial and services sector performance.

In its latest 'State of the Economy' report, CII has placed the growth in agriculture sector to be 3.2 per cent for the fiscal 2005-06, a marked recovery from 1.1 per cent growth recorded in 2004-05.

The report also mentions that the corporate performance of manufacturing sector as represented by 1,410 companies as sample for the quarter ending June 2005 indicates a trend of continued, albeit, slower growth. The services sector, excluding financial services, reflects a mixed trend.

The report states that even though sales growth has been low, a fall in total expenses has resulted in overall positive growth rates for operating and net profits at 33 per cent and 42 per cent respectively.

The report attributes this low growth to a high base in April-June 2004-05, during which, sales had increased by about 50 per cent.

The industry body said the minimum support services announced by the government for the 2005 kharif season had a positive impact, which resulted in an increase in area under sowing for major crops. The improved south-west monsoon has also aided the recovery in the progress of kharif sowing, leading to an improved kharif prospects for 2005-06, it added.

The report also points at a better-than-expected performance of index of industrial production (IIP) which grew at 9.3 per cent in April-July 2005-06.

According to the report, a strong growth in non- food credit, growth in capital goods production and imports are perhaps the factors supporting sustained growth for the industrial sector.

At the same time, the report cautions on emerging constraints reflected by slower production in the core sectors. The report says the overall growth of core sector production was 5.5 per cent for April-June 2005-06 as compared with 8.1 per cent for the same period in 2004-05.

Sectors that are pulling the growth rate down are crude petroleum, petroleum products and finished steel.

CII expects inflation to be on the higher side of its 5-5.5 per cent projections due to rising crude oil prices.

The report points out that it is important at this stage to depoliticise the issue of hydrocarbon pricing by actually dismantling the administered price mechanism combined with a policy to make kerosene available at affordable prices to the poorer sections of consumers in a manner that minimizes leakages.

REPORT CARD

CII has placed the growth in agriculture sector to be 3.2 per cent for the fiscal 2005-06

The report indicates a trend of continued, albeit, slower growth in manufacturing

The services sector, excluding financial services, reflects a mixed trend

The report states that even though sales growth has been low, a fall in total expenses has resulted in overall positive growth rates for operating and net profits

The report says minimum support services announced by the government for the 2005 kharif season had a positive impact