The Confederation of Indian Industry (CII) predicted slower Gross Domestic
Product (GDP) growth in the current year bucking last year’s 8.4% growth
propped up by 3.9% growth in Agriculture but insisted that growth will remain
impressive at the 8% level.
In its State of Indian Economy (SOE), CII cited hardening of interest rates,
rising fuel prices, and inflation to lower its expectation of GDP growth.
However, the 8% prediction assumes normal monsoon and a replay of Agricultural
performance combined with global growth.
CII said that while it is satisfied with the improving manufacturing and
electricity sector growth at 8.9% and 6.1% respectively in the 4th quarter (Q4)
of 2005-2006, it voiced concern over Industrials and Service sectors clocking a
year-on-year decline in the growth to 8.2% and 10.9% and the general slowdown
of mining to 3%. The Index of Industrial Production (IIP) growth also fell
marginally from 8.4% to 8.2%.
Inflation is a major problem in India now. As seen from accompanying table,
cost of food grain has grown up by as much as fuel. However, some specific
items such as Urad Dal went up by 65.9%, Moong Dal by 47.7%, and spices and
condiments by 22%. With Consumer Price Index (CPI) growing at 6.41%, the
Government has allowed the import of wheat and sugar at 0% duty thinking
that increased supply will lower the prices.
However, the Government is also expecting the inflation numbers to fall
primarily because last inflation figure which caused a jump in numbers to the
WPI happened June/mid-July last year. So, while inflation numbers may be
reported lower in summer, the real test will be the CPI.