The Centre for Monitoring Indian Economy (CMIE), has revised its real gross domestic product (GDP) growth forecast for the current fiscal year to 6.2% from the earlier 6%. The upward revision in the GDP projection comes on the back of a better performance of the country's economy in the first half of the current fiscal (FY 10), the economic think-tank has said in its latest report.
Separately, industry body, Confederation of Indian Industry (CII) said, with demand picking up across sectors and the economy getting back on track, over 70% of its members see the GDP growth to exceed 6%.
"The Indian economy's performance during the first half of 2009-10 has turned out much better than our expectations. This warrants an upward revision in our real GDP growth for the second consecutive month. The revision this time is from 6% to 6.2%," CMIE said.
According to the 'State of the Economy Report' released by CII, while industry and services have recovered on the back of the government’s stimulus package, the performance of agriculture is causing concern. “Economic indicators are looking up—industrial production has shown a significant upturn, business confidence has surged, financial markets have stabilised and capital inflows have returned,” said Chandrajit Banerjee, director general, CII.
According to CMIE, some sectors such as cement, steel, automobile, coal, gas and railway freight movement have seen a rapid growth in recent months. However, a poor southwest monsoon had some impact on growth, it said. "The only discordant note in this growth story was struck by the poor southwest monsoon this year. Had there been no drought, the economic growth in 2009-10 would have moved much closer to the pre-crisis level," CMIE said.
CII said according to a sample of 1,022 companies, including 774 manufacturing sector and 248 service sector companies, during the quarter ending September, net profits of companies increased by 38.5% on a year-on-year basis despite a year-on-year decline of 5.4% in net sales.
On a quarter-on-quarter basis, net sales have increased by 9.2% after three successive quarters of decline, indicating a recovery. However, net profits of companies have declined by 0.2% due to higher raw material and interest costs, CII added.
In view of the recent recovery, CII members recommended that the stimulus measures should not be withdrawn too soon; in particular, they said the CENVAT rates should be maintained till the implementation of GST system.
CII members also said that in order for domestic savings to be channelised into the market, the tax benefit on equity mutual funds should not be withdrawn. -Yogesh Sapkale[email protected]