New Delhi: Better agriculture growth and mixed corporate performance may help achieve 9% GDP growth in 2007-08 according to the latest issue of the ‘State of the Economy’ which CII released today.
According to the report, better agriculture growth and mixed corporate sector results were expected for the first half of 2007-08. The analysis of corporate sector performance is based on first half, (H1) April-September 2007 results of 2584 firms comprising 1595 firms from manufacturing and 989 firms from service sectors.
The analysis of Indian agriculture showed that agriculture and allied activities sector did well in Q1, registering growth of 3.8%. Area under pulses, oilseeds and maize increased and production of rice and oilseeds was expected to go up. Greater efforts were needed to enhance productivity to realize objectives set by National Development Council (NDC) to increase production of rice, wheat and pulses by 10, 8 and 2 million tonnes respectively by 2011.
However, given the robustness of the economy and better performance of agriculture vis-à-vis industry and services, the industry chamber expects GDP growth to remain around 9.2% for the 2007-08. Continuation of tighter monetary policy in the light of higher inflationary expectation due to international oil price hike and slowing down of U.S economy are current downside risks to high GDP growth.
* Net sales growth came down to 16.2% during H1 2007-08 from 29.6% during corresponding period of 2006-07
* Lower growth in net sales in corporate sector was mainly due to lower growth in net sales recorded in manufacturing, that came down to 11.9% in the first half of the current FY from 28.6% during the corresponding period of the previous year
* Services sector has not done well in comparison to its performance during the same period last year
* Net sales growth in the services sector went down to 28.4% in first half of the current FY from 32.4% during corresponding period of FY 2006-07
* Growth of Profit after Tax (PAT) came down to 30.2% for H1 of current FY from 42% recorded during corresponding period of FY 2006-07. Lower growth in PAT was mainly due to lower growth recorded in manufacturing sector
* During the same period PAT growth for manufacturing sector came down to 25.3% from 49.1%, going up for services from 29.4% to 39.9%
* Interest payments by corporate sector rose by 41.30% for the same period of current FY as compared to increase in interest payments by 28.8% registered during orresponding period of 2006-07, owing to rising interest rate as a consequence of tight monetary policies of RBI
* In addition to ensuring quality control of seeds, farmers needed to be educated about seed treatment and timing of sowing in order to maximize production of food grains in various seasons
* Shortage of power equipment may derail process of achieving target of power for all by 2012 with per capita availability of power more than 1000 units. Out of 78577 MW, power projects of 220 MW were commissioned and 62.3% of proposed capacity was still under construction
* Increasing net surplus under invisibles (services, transfers and income taken together) on current account of balance of payments increased by 36.4% in Q1 of current FY and it has offset 78.2% during April-June 2007 as compared to 73% during corresponding period of previous year. Resultantly, current account deficit remained at $4.7 billion in Q1 of 2007-08, compared to $4.6 billion during corresponding period of last year.
* Slowdown in U.S demand for imports and rupee appreciation impacted international trade - growth of export to U.S declined to 5.83% during April-May 2007 from 17.87% during corresponding period in 2006. Lower growth in U.S GDP brought down import growth from 6.3% in 2005 to 4% in 2006 and further to 1% in Q1 of 2007 picking up only in the Q2 to 11.9%, further decelerating to 8.1% in Q3.