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'Moderate growth in H1, but need steps to boost economy' - DG, CII

28
Nov '08

Mr Banerjee, DG, CII

The GDP estimate for the second quarter of 2008-09 that was released today reaffirms our belief that the Indian economy remains resilient in the face of headwinds. High interest rates at home and the global economic slowdown have been widely expected to have an adverse impact on India's GDP growth this year.

In these circumstances, the estimated growth of 7.6 per cent in the second quarter of 2008-09 shows that the growth momentum has so far remained intact. In fact, the services sector which accounts for a bulk of the economy continued to grow at a strong pace of 9.6 per cent.

Estimated GDP growth in the first half of 2008-09 now stands at 7.8 per cent. There is little doubt that growth is likely to slow down further in the second half when the full impact of the global economic crisis will be felt. However, if the government and the RBI continue to take steps to boost economic growth it seems likely that full year growth will not fall below the 7 per cent mark.

For addressing the decline in growth and to bridge the gap between growth of first half and second half of 2008-09, the focus should be on growth. Besides monetary policy actions such as a further reduction in interest rates, CII recommends fiscal stimulus to the economy through demand generating measures. “Fast-tracking of key projects would create demand are imperative for sustaining growth at 7.4 – 7.8%”, said Mr. Chandrajit Banerjee, Director General, CII.

CII has also mentioned that a large number of sectors such as Steel, Cement, Automobiles, Auto-components, Chemicals, textiles are witnessing contraction of top line and pressure on bottomlines. Fast tracking of infrastructure investments would provide the growth impetus for sectors such as steel and cement.

Further, cutting interest rates and enhancing liquidity would particularly enhance the demand for Automobiles and Auto-components and the specific sectors such as textiles and chemicals which are under pressure and may need additional protection from dumping.

In addition, the flow of credit to SMEs needs to be ensured, as they are likely to be disproportionately affected by the credit squeeze. “Policy measures are needed to ensure that negative sentiment is reversed sooner rather than later”, said Mr. Banerjee.

Confederation of Indian Industry

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