The Hindu Business Line : CII revises GDP growth to 7.2 pc

THE Confederation of Indian Industry (CII) has revised upwards to 7.2 per cent its prediction for growth of the gross domestic product (GDP) during the current fiscal. The prediction has been made in the `State of the Economy', which reviews the economic situation till the end of September this year.

During the previous review covering the period March-June, the chamber had forecast a GDP growth of about 6.5-6.8 per cent for 2003-04.

"The upward revision in growth to 7.2 per cent is due to the excellent monsoons, higher than expected foodgrain output and agricultural income, and significantly better performance of the industrial, manufacturing and service sectors", the CII's Chief Economist, Dr Omkar Goswami, has said.

With agriculture and allied activities accounting for about 24 per cent of the GDP, the chamber has predicted that the farm sector would grow at 7.5 per cent. It said that the 7.5 per cent growth was not an optimistic prediction as the percentage suggests, but owing to the significant reduction in agricultural output on account of the drought in 2002-03, the growth would be over a smaller base.

"Indeed, given decent rains in the winter months, it is quite possible that agricultural growth could exceed 8 per cent", Dr Goswami said.

The industrial sector consisting of mining, manufacturing, electricity and construction accounts for around 26 per cent of the GDP. The confederation said that this sector is expected to grow at 6.3 per cent during the current fiscal. "Order books of companies in the manufacturing sector are more full than they have been in the last four years", Dr Goswami said. The first-half year revenues have been higher than before, profitability is up and there is a general sense of optimism.

The services sector, which now accounts for one-half of India's GDP, is expected to grow by 7.5 per cent. "For eight of the last 10 years, in good years as well as in bad, the services sector has registered growth in excess of 7 per cent, and has often crossed 8 per cent,'' he said.

The calculation is as follows. Agriculture will contribute 1.8 per cent growth to the overall GDP (7.5 per cent agricultural growth multiplied by a weight of 24 per cent). Industry will contribute 1.6 per cent to the GDP (6.3 per cent growth multiplied by a weight of 26 per cent). And services will contribute 3.75 per cent to the GDP (7.5 per cent growth multiplied by 50 per cent). Thus, the overall GDP growth for 2003-04 is expected to be 7.2 per cent.

"To sustain this excellent growth in the future, India needs to focus on accelerating the process of economic reforms and to concentrate on building infrastructure", Dr Goswami said.

He noted that if this growth impetus continues for the next two quarters, India will be seeing the beginning of a much-needed investment cycle — as companies start building larger capacities to meet greater demand.

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