ASSOCHAM survey of economists and industry leaders has indicated that continuing slowdown in industrial growth and its spillover effect on the service sector, deficit Monsoon and worsening global are expected to drag Indian economic growth to 6-6.3 per cent in the fiscal 2012-13.
As per the official data, Indian economy had slowed to 6.5%, the nine-year low in 2011-12.
The survey conducted amid 110 senior industry leaders and economists also cautioned that the prospects may further worsen if some of the policy issues are not immediately addressed.
Almost 80% of the economists covered in the survey, said the government has to create a fiscal space for significantly raising its capital expenditures so that the economy gets an investment booster. This can be done by removing untargeted subsidy bill. The private sector will follow as a spin-off.
As the overall business confidence has further eroded in the first quarter of the current fiscal, the outlook survey of The Associated Chambers of Commerce and Industry of India indicated that the gross domestic product may grow even slower than the RBI’s lower projections of 6.5 per cent as the risks have increased on several counts.
Significant deficiency in Monsoon has added to the problems. The survey found that the prospects of growth in agricultural sector are dismal.
In fact, the agricultural sector which grew at about 2.5% in 2011-12 may not show any growth this year since sowing of the khariff crops, the main stay of the sector, has been affected.
In this background, the survey respondents find that the industrial expansion at best could be just about 4 to 4.5% for the year while the services sector, the major contributor to the GDP is also showing signs of weakness. Mining is at a near standstill due to inadequate regulatory environment and manufacturing is at low ebb.
However, all is not lost pointed out majority of the survey participants if immediate steps are taken to address the policy issues. These include addressing bottlenecks facing the infrastructure projects and removing hurdles in the way of the foreign direct investment.
ASSOCHAM President Rajkumar Dhoot said that “The Reserve Bank of India has rightly pointed out that the Indian economy is at the cross-road. As the central bank called it, the economy can ‘spin up or down depending on how the policy uncertainty is addressed and supporting measures put in place’. Even though confidence level is low, urgent remedial measures can retrieve the situation.”
The immediate measures are required, since the global headwinds are staked against most economies in the world, including emerging markets of India, China and Brazil. While China may soft land with growth below nine per cent, India and Brazil would find it more difficult to cope up.
The survey found while it is true that India still has a large domestic market, the country’s total external engagement is well over half the size of the economy. Mr Dhoot said that “It is not only the merchandise exports which are getting hit, but also the services exports which are directed towards the problem hit western economies.”
Source - Assocham
(www.steelguru.com)
