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Do not expect GDP growth to surpass 7.6%, ASSOCHAM

26 Jul '08

4 min read

Giving thumbs down to the economic outlook on high inflation and hardening interest rates, majority of 77 per cent of the 350 CEOs surveyed by the ASSOCHAM Business Barometer (ABB) do not expect GDP growth to surpass 7.6 per cent rate.

The ABB has revised its April GDP projections from 7.9 per cent to further southwards at 7.6 per cent, as double digit inflation coupled with tight monetary policy is pinching the industrial units due to increased interest and input costs.

The CEOs fear that, RBI may take further steps with revision in interest rate if domestic inflation continues to remain in double digit.

The ABB found that industry leaders fear that economic growth may moderate in view of rising prices of fuel and manufactured goods, reduced consumer demand, global economic slowdown and negative sentiments in stock markets.

Sixty five per cent of the business heads felt the economy is double hit with high inflationary pressures caused due simultaneously rising energy and commodity prices and tightening money situation.

Overall growth in the GDP would have been even lower had agriculture and export driven sectors not been registering impressive growth, which will also show a decent performance of the economy at 7.6 per cent for FY '09 as stated by Mr. Sajjan Jindal, President ASSOCHAM

About 72 per cent of the ABB respondents were of the view that the Industry may witness a moderate growth rate of 7.2 per cent in FY '09 as against 8.7 per cent in the previous fiscal on account of sharp rise in input costs, lower demand, huge interest bills and global slowdown.

Manufacturing which constitute a share of 15.5 per cent in the total GDP witnessed slowdown in the growth rate for the period April-May 2008-09 from 12.7 per cent to 5.3 per cent in the same period of the previous fiscal.

Eighty eight per cent of ABB respondents felt that the consumer durables are becoming less affordable due to high interest rates, rising raw material cost, high fuel & power prices and costly transportation charges.

They added that despite the rise in raw material cost like iron-ore and agri-products the consumer durable and non-durable firms are unable to increase the prices of finished products, as it will suppress demand further creating more pressure on companies' profit margins.

According to 75 per cent of the CEOs the first quarter of FY'09 registered a satisfactory growth in automobile sales due to low base effect and marriage seasons in April and May.

But the impact of rising prices of fuel, copper and steel coupled with high interest rate and low availability of credit might hit the sales by the next quarter of FY'09, ABB participants added.

In the automobile sector the total vehicle sales in the country were up by 8 per cent in April-June 2008-09. Among the segments, the three-wheeler recorded a flat sale, whereas commercial vehicles were up 10 per cent, and two-wheelers up by 7 per cent.

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