New Delhi: Despite moderation continuing in inflation and industrial production maintaining steady pace,GDP rate is likely to stay between 8.5 - 8.7% in 2007-08, according to an assessment made by industry chamber, Assocham.
Multiple reasons have been attributed to the fall in GDP growth from 9.3% in 2006-07 to an estimated 8.5 to 8.7% in current fiscal. These include:
* Rising interest rates which adversely affect export proceeds
* Slowdown in construction output growth from 14.26% in 2005-06 to 10.7% in 2006-07
* Imminent slow down in industrial sector output growth in current fiscal
* In construction sector, huge investments have taken place while their output has been highly disproportionate
*External demand will grow slower to adversely impact overall GDP
* Uneven and inequitable monsoon fall which caused excessive floods will harm agriculture production.
* Erratic power supplies will affect industrial production and manufacturing, the results of which will be felt in Q3 of current fiscal
* Exchange rate continues to appreciate and widening of trade deficit might restrain rupee from sharp appreciation.
Inflation may come down further
The Chamber expects the inflation rate to decline further in coming months as full impact of monetary policy measures on prices would take some time. The price of primary commodities would largely depend on variety of other factors and if these do not cooperate, inflation might move upward and restrict supplies.
* Finance Ministry and RB to hold their heads together and bring down rising interest rates to spur up external and internal demand
* Power supplies to be assured to help industry maintain uninterrupted and regular production so that GDP remains steady
* Agriculture production to be maintained by all means and reforms in this sector ushered in as quickly as possible.
* Exports to get top priority by curtailing transaction costs and providing necessary infrastructure support to exporters so that the targeted exports of $160 bn for 2007-08 are realized
Rising interest rates, erratic power supplies and uneven monsoon showers have amounted to rising input costs which finally affect industrial production and its pricing. Therefore, attempt should be so adequate as to keep input costs and cost of raw materials under control for effective industrial production