Indian economy to slow down

New Delhi, July 15:

The Indian economy is expected to slow down further in 2007-08 due to surging interest rates, appreciating rupee and poor infrastructure, states a survey.

During the fourth quarter of 2006-07 ending in March 2007 the economy grew at 9.4 per cent compared to 10 per cent in the same quarter of 2005-06. The GDP is now pegged at 9.2 per cent. So even though positive growth is expected for sectors such as agriculture, industry and services, the economy would face a downward pull, CII said in its survey ‘State of the Economy’.

The agricultural sector is expected to grow to three per cent from the current 2.7 per cent due to the efforts adopted to produce primary articles to boost their supply in an effort to check inflation. However, the study also indicated a declining trend in the agricultural sector with the decrease in oilseed production, which has shown a decline of 14.79 per cent. This according to CII would lead to increase in import of edible oil owing to its huge demand.

“Total oilseeds production has declined and recorded 23.26 million tonnes against the target of 29.40 million tonnes in 2006-07, registering a negative growth rate of 14.79 per cent,” the survey stated.

The body has thus suggested restructuring the domestic pricing policy of various crops as more and more farmers are switching from oilseeds to producing wheat and gram that are more lucrative options. Growth of the Indian industry is also expected to face a downward trend on the backdrop of some rigid monetary measures taken by the Reserve Bank of India (RBI).

The services sector, according to CII, is expected to grow marginally than 2006-07 due to high demand specifically in financial services and business services, which includes the information technology (IT) and IT-enabled services (ITeS).

“The three major components of the service sector namely, trade, hotels and communications; financing, insurance, real estate and business; and community, social and personal services grew at 13.0 per cent, 10.6 per cent and 7.8 per cent respectively,” CII said.

On the issue of the Indian rupee appreciating by the day, the chamber said it had made a negative impact on the profit margins and bottom lines of the textile and leather sectors.