GDP grew 7% in first half: CII

India's economy grew by seven per cent in the first six months of 2004-05 because of a healthy growth in the services and manufacturing sectors, according to the Confederation of Indian Industry's (CII) "state of the economy" report.

Despite a dip in November 2004, the index of industrial production (IIP) between April and November 2004 rose 8.3 per cent while the services sector recorded a growth of 9 per cent. The slowdown in the IIP in November 2004 was attributed to a low demand for consumer and intermediary goods.

The agriculture sector, however, showed a decline of 0.8 per cent during the third quarter of the current fiscal. The downward trend in agriculture continues since the third quarter of 2003. Within the services sector, trade, hotels, transport and communications grew by 11.6 per in the third quarter of 2004-05.

The country's corporate sector, too, recorded a strong performance during the period with turnover and operating profits growing by 10 per cent for both services and manufacturing sector companies.

In the manufacturing sector, the average sales for the surveyed companies were Rs 114 crore during April-December 2004 and increased by 10 percentage points from the same period last year. Growth in operating profits are also up 10 per percentage points to 36 per cent compared with last year.

Sales in the services sector increased by 36.8 per cent in the first three quarters of 2004-05. Profitability, measured either as operating profit or post-tax returns, has also shown strong growth, but not as much as in the manufacturing sector. For 544 manufacturing firms, operating margins increased from 14.8 per cent to 17.4 per cent.

According to CII, the increase in margins reflects greater capacity utilisation as sales volumes have increased and unit fixed costs have declined, helping to absorb the rise in variable input costs.

According to the report, the end of the third quarter has shown an expected relief in inflation with December recording 6.7 per cent, going below seven per cent for the first time since the end of the first quarter.

Major contributors to the decline in inflation were primary articles, which fell from 4.5 per cent in November to 3.1 per cent in December 2004.