India’s industrial sector, which was affected the most due to the global economic crisis, is likely to grow at a faster rate in the current fiscal because of strong domestic demand, the Centre for Monitoring Indian Economy (CMIE) said.
The economic think tank predicts industrial output to expand by 6.1 per cent in 2009-10, compared with the expected 4.3 per cent growth in FY 08-09.
“We expect the current recovery seen in cement, steel, automobile and in the core industries index to gather further momentum in the coming months,” CMIE said in its April edition of Economic Intelligence Services (EIS).
Higher industrial output would help India’s Gross Domestic Production (GDP) to grow by 6.6 per cent, compared with estimated 6.5 per cent in just ended fiscal, it said.
CMIE based its optimism on better industry performance on the fact that two issues — high inventory levels and liquidity problem — that plagued the industrial sector in three months ended December 2008 have eased.
The industrial sector, which make up nearly 28 per cent of India’s output, is the most affected from the global crisis because of falling global demand and also because of liquidity crunch that adversely affected their operations. Exports are expected to shrink for the sixth consecutive month in March 2009.
However, CMIE said recovery in automobile and steel sectors indicate strong domestic demand. “Low inflation and low interest rates are expected to further strengthen this demand impetus,” said CMIE.