The Hindu Business Line : CII forecasts 6.6-7 pc GDP growth

CII expected the industry to grow at 7 per cent and services at 9.2 per cent. GDP growth, is therefore, expected to be in the range of 6.6 to 7.0 per cent, with outcome likely to be at the higher end of the range, the report added.

New Delhi , May 23

THE Confederation of Indian Industry (CII) has forecast that gross domestic product (GDP) will grow at 6.6-7 per cent during 2004-05.

The forecast was made in the `State of the Economy' report, which was released today. The report said that the upswing in industry and services sectors would continue and accelerate over the next few quarters, as domestic and external demand continues to increase. The report added that in many sectors, companies were preparing to meet rising demand expectations by expanding capacity, modernising technology and focusing on marketing strategy.

In the services sector, the report expected a sharp increase in growth as rising incomes in rural and urban economies allowed greater spending on services ranging from transport and communications to financial services.

However, the report said that at present, the outcome in the agriculture sector was the most difficult to predict. While agricultural growth will be lower than the double-digit growth recorded last year, the report said it would not be hard for agricultural output to grow by a few percentage points. The report factored in a possible range of 0 to 2 per cent agricultural growth. And given that the Indian Meteorological Department has predicted a normal monsoon this year, a two per cent growth was highly possible.

The report expected the industry to grow at 7 per cent and services at 9.2 per cent. GDP growth, is therefore, expected to be in the range of 6.6 to 7.0 per cent, with outcome likely to be at the higher end of the range, the report added.

Besides the aggregate data on corporate performance, the report showed that the manufacturing sector had maintained its healthy growth trend over the fourth quarter of 2003-04.

For a sample of 222 companies in the manufacturing sector, sales grew at 17.7 per cent in 2003-04 while net profit grew at 30.4 per cent. For a sample of 84 companies in the services sectors, the growth rates were even stronger at 38.7 per cent and 39.7 per cent. In several companies, strong growth in revenues together with a sharp reduction in interest costs had boosted their profitability.

The report pointed out that the sharp appreciation of the rupee could impact the competitiveness of exports. The appreciation of the rupee against the Dollar has been one of the sharpest in comparison to several South-East Asian countries.

The rupee has also appreciated significantly in real terms. The average value of the Real Effective Exchange Rate (REER) has been rising every year compared to its average value over the 10-year period from 1990-91 and 1999-00.

However, the recent decline in the rupee's value has come as a relief to domestic manufacturers. With the dollar changing direction to appreciate against major currencies in the international market, the report expected less pressure on the rupee to appreciate in the near term.

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