Cii Presages Gdp Growth At 5.5% In 2002-03

The Confederation of Indian Industry (CII) has predicted that the Indian economy would grow by around 5 per cent during the current financial year, while the fiscal deficit has been projected to be at 5-5.1 per cent of gross domestic product.

In its corporate outlook for 2002, CII has, however, painted a more rosy picture for the 2002-03 fiscal with a GDP growth of 5.5-6 per cent. The growth in the agriculture sector in the current fiscal is expected to give a fillip to the manufacturing sector during the next financial year, the CII felt.

"CII believes that the 4.5 per cent growth in agriculture income in 2001-02 will contribute to a gradual turnaround in the manufacturing sector in the first half of 2002-03," a statement from the chamber said.

On the fiscal deficit, CII said poor collections would result in an increase in deficit from the budget estimate of Rs 116,314 crore to about Rs 125,000 crore. For the current fiscal, the government had set the fiscal deficit target at 4.7 per cent of GDP.

The industry chamber has said that a higher growth in the next fiscal would be led by higher demand for steel and cement followed by two-wheelers, tractors and consumer durables.

In its predictions for the next year, CII has said that interest rates may harden by the second quarter of 2002 if the fiscal deficit for the year goes out of control.

CII has predicted that 2002 will be the year of greater competition for the Indian industry from within and outside the country. The chamber has also said that the average customs duty will fall by 5 percentage points from 35 per cent to 30 per cent.

As a result of the growing competition, companies are expected to offer greater discounts in order to maintain or increase marketshare and margins would come down. Profit after tax is expected to be around the same level with margins in manufacturing sector coming down in the range of 5.9-6 per cent.

"The days of astronomical P/E ratios are over. The median P/E ratio for 177 group A companies as on Christmas eve was 8.3. CII expects this P/E ratio to average between 7.5 and 8 throughout 2002 and considers this to be a welcome return to sanity in valuation," it added.