Drought likely to pull down growth

Though the Indian industry is looking forward to a double-digit growth in terms of sales and profits in the current fiscal, the delay in mon...

Though the Indian industry is looking forward to a double-digit growth in terms of sales and profits in the current fiscal, the delay in monsoons and the declaration of drought in many states is likely to limit the growth of overall economy between five to 5.4 per cent in 2002-03.

According to the responses to a CEOs snap poll conducted by the Confederation of Indian Industry CII at a meeting held recently, 54 per cent of the respondents felt that sales would be between 10 8211; 20 per cent in the current fiscal while 48 per cent predicted that profits for their companies would also fall in this range.

Foreseeing a significant impact of the drought situation on the economy, 71 per cent of the CEOs felt that GDP growth would fall below 5.4 per cent in 2002-03. The CEOs pointed out that to alleviate the human and economic problem there is a need to release the surplus Food Corporation of India FCI foodgrains for massive nationwide food-for-work programmes aimed at building rural roads and rural infrastructure.

Emphasising on the importance of investments in infrastructure to remove related bottlenecks and enhance Indian industry8217;s competitiveness, a majority of the CEOs felt that this would also be a key driver of FDI inflows into the country. Reducing the number of government clearances and easing restrictions on entry as well as exit are the two other critical issues that need to be addressed to facilitate greater FDI inflows.

Expressing strong opinion on the current debate on using India8217;s forex reserves efficiently as a tool for economic growth, 91 per cent of the responding CEOs endorsed the alternative uses of forex reserves, which have risen to almost US 60 billion. Liberalised norms for overseas investments of Indian companies and financing growth oriented projects constitutes optimal use of India8217;s forex reserves, according to the respondents. Aggressive promotion of exports by extending credit lines to other developing countries and reducing India8217;s foreign debt were some of the other uses suggested by the responding CEOs.

The CEOs foresaw only moderate implications for India of the recent developments in the US with uncertainties in the accounting and auditing profession and its impact on stock markets. Only 29 per cent of the respondents felt that there were significant implications for India.

Commenting on export prospects in the year ahead J N Godrej, Past President CII and CMD, Godrej and Boyce Mfg Co Ltd, pointed out that 8220;there is a good potential for exports of manufacturing products especially to China8221;.

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According to Naishad Parikh, MD, Amtrex Hitachi Appliances, there is a need to 8220;announce introduction of VAT by April 1, 20038221; as a critical component of taxation reforms. CII8217;s another past president and CMD of Nicco Corporation Rajive Kaul felt that recovery will be slow.

8220;Investments in infrastructure and using the surplus foodgrains to meet the drought situation8221; were key focus areas according to P Krishnamurthy, Vice Chairman, Morgan Stanley. JK Industries8217; Managing Director R P Singhania, stressed on urgent action on the labour reforms front.

Other respondents to the CII CEOs snap poll include Arun Bharat Ram, M V Subbiah, Suneel M Advani, D M Sawhney, Adi Godrej, Balu Doraisamy, Dipankar Chatterji, Rajesh V Shah, Shobana Kamineni, G V Sanjay Reddy, Sumit Mazumder, S Santhanam, Pradeep Mallick, S Mahalingam, S S Samal, Ratan Jindal, S P Oswal, C P Rangachar, S Sandilya, Kiran Mazumder Shaw, S Ramakrishnan, Satish Kaura, R S Pawar, Hemendra Kothari, Vijay Thadani, Som Mittal and Jagdish Khattar.