Rising commodity costs to affect corporate bases

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MUMBAI, Mar 30 (Commodity Online): Rising raw material prices could impact corporate bases and consequently on industrial and economic growth. In FY 2011, India's industrial growth will be 11.2 per cent on account of sharp rise in input costs, lower demand, huge interest bills and weak sentiments, according to an ASSOCHAM Business Barometer Survey among 421 CEOs in India. Agriculture is expected to grow 4.1 per cent in 2010-11, industry 11.2 per cent, Services 10.8 per cent and overall GDP growth at 8.7 per cent revised from the earlier projection of 9 per cent by ASSOCHAM. It has revised its November GDP projections from 9.0 per cent to further southwards at 8.7 per cent, as double digit inflation coupled with tight monetary policy is pinching the industrial units due to increased interest and input costs. The CEOs fear that, RBI may take further steps with revision in interest rate if domestic inflation continues to remain in double digit. The survey found that industry leaders fear that economic growth may moderate in view of rising prices of fuel and manufactured goods. On the other hand Cement, steel and other commodities have pushed up as well while prices in the auto sector and consumer durables are set to factor in the rise in input prices. 58 per cent of the business heads felt the economy is double hit with high inflationary pressures caused due simultaneously rising energy and commodity prices and tightening money situation. "The Indian economy has the potential to grow faster than 9 per cent recorded before the 2008 global financial crisis and stay at that level. However, to sustain such levels, there are no easy options and 'significant deepening of reform initiatives is needed", says ASSOCHAM. At the projected growth of 9 per cent, there will be a need to invest ` 44.90 trillion, in the next five year plan (2012-2017) which will translate into 9.95 per cent of GDP, as said by the Government of India. It has further added, in FY11 as the private sector demand; both consumption as well as investment picked up. However, the government consumption demand is expected to moderate on account of fiscal consolidation plan and gradual withdrawal of stimulus packages announced earlier. Nonetheless, the focus of government spending on infrastructure sector would continue to support growth.