Mumbai, Mar 5 (UNI) The Indian economy grew at an average rate of 8.6 per cent between 2003-04 and 2006-07, which is considered the strongest ever growth stimulus in India since its independence but also puts it in the league of the fastest growing economies in the world.
These and other conclusions were made in the India Outlook 2007 presented by CRISIL, providing trends and outlook for the Indian economy, manufacturing, services and infrastructure sectors.
According to CRISIL, a Standard&Poor's Company and India's leading ratings, research, risk and policy advisory company, the Indian economy continues to demonstrate robust growth driven by all sectors of the economy, with the underlying domestic consumption-led growth that is swiftly translating into investment-led growth, with a little overheating.
''A combination of global and domestic factors could moderate the growth momentum slightly in fiscal 2008. A mild slowdown in the US economy, relative to its 2006 performance, and a drop in the Chinese growth rate are key global influencers; however, growth momentum is more vulnerable to high inflation and overheating in the domestic economy,'' noted CRISIL Chief Economist and Executive Director Dr Subir Gokarn.
With GDP growth expected at around 8 per cent, the fiscal targets for 2007-08 appear to be within reach. CRISIL estimates the risk of fiscal slippage at Rs 50 billion which is about 1 percentage point of GDP. For 2007-08, CRISIL expects GDP growth to moderate to 8.4-9.0 per cent, inflation at 5-5.5 and 10-year GSec yields at 7.8-8 per cent.
The INR/US exchange rate is expected to stay in the band of 44-45 in 2007-08.
Strength of industrial investments will reverse the current trend of rising operating rates.
Over the next 5 years, investment growth will be led by the continued growth momentum in industrial and infrastructure investments. The continued strength of industrial investment is likely to reverse the present trend of rising operating rates across industries by the fiscal year 2008-09.
Sectors that are expected to drive the growth in investments include metals, automobiles and cement, owing to capital expansion and resulting investments in plant and machinery and a rapid growth in the construction segment led by the non-housing sector.
The CEO of Crisil Research&Information Services Limited, the Research subsidary of CRISIL Ajay Dwivedi said ''The share of housing investments in construction is expected to decrease from two-thirds in the past 5 years to less than 60 per cent in the next 5 years. The fastest growth in the construction segment is expected in the ports and airports and office space segments, albeit, on a smaller base.'' On the other hand, the largest quantum of investment growth is likely in roads and railways, urban infrastructure, irrigation and industrial sectors, Mr Dwivedi said adding, ''Indian construction players are acquiring a global scale as a result of the continuing strength of construction activity in India.'' Investments in the housing sector, which are led by urban activity, may see a slowdown over the short to medium term, as real estate prices have begun to push the limits of affordability. Income and age demographics to create strong opportunities for consumption growth and workforce expansion India is a large but very diverse consumption market ''She is many nations rolled into one from a Purchasing Power Parity (PPP) perspective. Expanding rural employment, and thus consumption, will be a key challenge, to be met by increasing education levels and skill enhancement,'' he said.
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These and other conclusions were made in the India Outlook 2007 presented by CRISIL, providing trends and outlook for the Indian economy, manufacturing, services and infrastructure sectors.
According to CRISIL, a Standard&Poor's Company and India's leading ratings, research, risk and policy advisory company, the Indian economy continues to demonstrate robust growth driven by all sectors of the economy, with the underlying domestic consumption-led growth that is swiftly translating into investment-led growth, with a little overheating.
''A combination of global and domestic factors could moderate the growth momentum slightly in fiscal 2008. A mild slowdown in the US economy, relative to its 2006 performance, and a drop in the Chinese growth rate are key global influencers; however, growth momentum is more vulnerable to high inflation and overheating in the domestic economy,'' noted CRISIL Chief Economist and Executive Director Dr Subir Gokarn.
With GDP growth expected at around 8 per cent, the fiscal targets for 2007-08 appear to be within reach. CRISIL estimates the risk of fiscal slippage at Rs 50 billion which is about 1 percentage point of GDP. For 2007-08, CRISIL expects GDP growth to moderate to 8.4-9.0 per cent, inflation at 5-5.5 and 10-year GSec yields at 7.8-8 per cent.
The INR/US exchange rate is expected to stay in the band of 44-45 in 2007-08.
Strength of industrial investments will reverse the current trend of rising operating rates.
Over the next 5 years, investment growth will be led by the continued growth momentum in industrial and infrastructure investments. The continued strength of industrial investment is likely to reverse the present trend of rising operating rates across industries by the fiscal year 2008-09.
Sectors that are expected to drive the growth in investments include metals, automobiles and cement, owing to capital expansion and resulting investments in plant and machinery and a rapid growth in the construction segment led by the non-housing sector.
The CEO of Crisil Research&Information Services Limited, the Research subsidary of CRISIL Ajay Dwivedi said ''The share of housing investments in construction is expected to decrease from two-thirds in the past 5 years to less than 60 per cent in the next 5 years. The fastest growth in the construction segment is expected in the ports and airports and office space segments, albeit, on a smaller base.'' On the other hand, the largest quantum of investment growth is likely in roads and railways, urban infrastructure, irrigation and industrial sectors, Mr Dwivedi said adding, ''Indian construction players are acquiring a global scale as a result of the continuing strength of construction activity in India.'' Investments in the housing sector, which are led by urban activity, may see a slowdown over the short to medium term, as real estate prices have begun to push the limits of affordability. Income and age demographics to create strong opportunities for consumption growth and workforce expansion India is a large but very diverse consumption market ''She is many nations rolled into one from a Purchasing Power Parity (PPP) perspective. Expanding rural employment, and thus consumption, will be a key challenge, to be met by increasing education levels and skill enhancement,'' he said.
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