Pockets of robust growth still exist
Amidst fears of deepening recession, it is heartening to note,there still exist pockets of robust growth in the economy.
By ET Bureau |
Amidst fears of deepening global recession, it is heartening to note that there still exist pockets of robust growth in the Indian economy. The services sector largely continues to defy the downward trend. Overall it has not been impacted by the near collapse in demand seen in the traditional bricks and mortar industries, and trade bodies such as CII estimate the services sector companies will report about 15-20% growth in topline for 2008-09.
Admittedly, it is slower than the 25-30% growth of 2007-08, yet in times when large companies globally are gasping for breath, it provides a cause for cheer. The FMCG sector too is expected to maintain its growth momentum, growing about 18-20% against 24-25% last year as demand for cheaper and low margin products continues to be robust. Sales of two-wheelers have also so far held up better than other vehicles.
Much of this demand ��� for telecom services, FMCG and two wheelers ��� originated from the rural areas, and that is all thanks to exceptionally good output of the agricultural sector this fiscal year. In the near term, these sectors will continue to grow better than many others which are interest-rate sensitive or income elastic.
Worryingly, the overall confidence level of the Indian industry continues to wane. In a Ficci survey earlier this month, 81% of the respondents said their industry���s performance was weaker now than six months ago due to the deterioration in the economic situation. And, more than half expect overall economic conditions to worsen over the next six months and their own performance to be hit.
Nevertheless, the monetary easing pursued by the Reserve Bank of India since October 2008, together with increased spending by the government on infrastructure, offers a glimmer of hope for sectors such as cement and steel that have seen a sudden slump in demand.
The fall in commodity prices should provide some respite to user industries, which in the months ahead can expect to cut prices of their products. The industry needs to keep up at least some of its animal spirits to tide over the current crisis.
Admittedly, it is slower than the 25-30% growth of 2007-08, yet in times when large companies globally are gasping for breath, it provides a cause for cheer. The FMCG sector too is expected to maintain its growth momentum, growing about 18-20% against 24-25% last year as demand for cheaper and low margin products continues to be robust. Sales of two-wheelers have also so far held up better than other vehicles.
Much of this demand ��� for telecom services, FMCG and two wheelers ��� originated from the rural areas, and that is all thanks to exceptionally good output of the agricultural sector this fiscal year. In the near term, these sectors will continue to grow better than many others which are interest-rate sensitive or income elastic.
Worryingly, the overall confidence level of the Indian industry continues to wane. In a Ficci survey earlier this month, 81% of the respondents said their industry���s performance was weaker now than six months ago due to the deterioration in the economic situation. And, more than half expect overall economic conditions to worsen over the next six months and their own performance to be hit.
Nevertheless, the monetary easing pursued by the Reserve Bank of India since October 2008, together with increased spending by the government on infrastructure, offers a glimmer of hope for sectors such as cement and steel that have seen a sudden slump in demand.
The fall in commodity prices should provide some respite to user industries, which in the months ahead can expect to cut prices of their products. The industry needs to keep up at least some of its animal spirits to tide over the current crisis.
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