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High growth momentum in manufacturing to continue: CII

business Updated: Aug 15, 2010 12:36 IST

Industry is buoyant about manufacturing sector growth in the next two quarters even as the pace of expansion slowed to 7.3 per cent in June, a CII survey said on Sunday.

However, despite the dip, the first quarter expansion was healthy at 12.2 per cent.

"...business sentiment remains positive and industry members expect the growth momentum to remain strong in the next two quarters," CII Director General Chandrajit Banerjee said. The survey was based on response of 350 industrialists across 110 manufacturing sectors.

CII, however, said the recent hike in key policy rates by Reserve Bank of India (RBI) may have an impact on industry's growth trajectory.

The RBI has raised key rates thrice this year to put a lid on rising inflation.

While the outlook is buoyant for the next two quarters, there may be a slight slowdown in the pace of manufacturing activities in July-September period, the survey said.

In the second quarter, 27 sectors are expected to register excellent growth of more than 20 per cent, 30 are likely to record high growth rate of 10-20 per cent, 42 sectors are expected to post moderate growth rate of 0 to 10 per cent while 11 sectors are expected to be in the negative zone.

But the October-December quarter is expected to be better than the previous as more sectors are likely to post excellent and high growth rates. The number of sectors posting excellent growth would increase to 32 (from 27) and in high growth rate there would be 40 sectors.

The participants said that for a healthy growth for the sector, the government should implement GST at the earliest, retain the present levels of CENVAT and excise rates, correct the inverted duty structures and simplify taxation procedures.

Industry is facing problems like high raw material cost, infrastructure bottlenecks, threat from Chinese imports, inadequate credit supply, the survey said.