Dr Subir Gokarn, chief economist, Crisil, said that the growth in industry seemed sustainable largely due to fall in interest rates. Corporate performance has been tremendous this year where 65 per cent of growth in profit before depreciation and taxes (PBDT) is on account of growth in productivity and 35 per cent on account of lower interest payment by corporates, said Dr Gokarn.
A report presented by Crisil at a press briefing in New Delhi also said that additional growth impetus was likely to come towards the end of the year when rural spending responded to the agriculture rebound. This is bouyed by both good monsoon and industrial performance combined with a good revenue collection through direct taxes. A shortfall on disinvestment process has led to the rating agency see the fiscal deficit settling down at 5.8 per cent of the GDP.
Based on the projection of commodity prices coming down, the rating agency expects the average inflation rate to be 4.8 per cent with the end of the year rate being 2.9 per cent. Dr Gokarn also said that the moneteray policy would not bring about any sustantial difference.
According to CRIS INFAC, the research firm of Crisil, the revival of the manufacturing sector is likely to be sustained in the medium term. This, according to the report, has been largely due to retail finance and activities in the construction industry.