India Inc To Drive GDP Growth: CII Study - June 9, 2008

In the backdrop of a global economic slowdown and high oil prices, coupled with increasing inflation and tight monetary policy regime at home, which are casting a shadow on the growth prospects of the country, the Indian Industry is confident of achieving 8.6 per cent GDP growth in the current fiscal. With higher gross domestic interest rates, increasing capital expenditure by the private sector and healthy ICOR (incremental capital output ratio) at around 4.0, India could record a GDP growth of about 8.6 per cent during 2008-09, the Confederation of Indian Industry (CII) has said in a study. While noting the silver lining in the clouds, the CII study, however, pointed out that the business environment had to remain conducive for India Inc to deliver the desired results. CII''s optimism is slightly higher than finance minister, Mr P Chidambaram, who expected the economy to grow by close to 8.5 per cent this fiscal against nine per cent during 2007-08. The Prime Minister''s Economic Advisory Council had projected the economy to grow by eight per cent this fiscal.

The CII said sustained growth in net profits and gradual increase in productivity and capital efficiency had enabled the Indian corporate sector to cut costs and be globally competitive. This will drive future economic growth of India, it added. Quoting an analysis on corporate sector results over the last eight quarters pertaining to manufacturing, services other than financial services and financial services sectors, the study revealed that corporate sector performance had contributed immensely to Indian''s macro economic fundamentals.