Indian economy will clock an impressive 7.3 percent GDP growth for the fiscal 2005-06, at the back of strong prospects of Kharif production and reasonably buoyant industrial and services sector performance, the Confederation of Indian Industry (CII) has predicted.

In its latest State of the Economy Report, CII has said that the minimum support services (MSP) announced by the Indian government for the 2005 Kharif season had a positive impact, which resulted in an increase in area under sowing for major crops.

The improved South West monsoon has also aided the recovery in the progress of Kharif sowing, leading to an improved Kharif prospects for 2005-06, with an increase of 3.2 percent, a marked recovery from 1.1 percent growth recorded in 2004-05.

The report also pointed towards a better than expected performance of Index of Industrial Production (IIP) which grew 9.3 percent in April-July 2005-06. According to the report, a strong growth in non-food credit, growth in capital goods production and imports are perhaps the factors supporting sustained growth for the industrial sector.

Inflation is expected to be on the higher side of its 5-5.5 percent projections due to rising crude oil prices, said the report.

The report has brought out that the Indian power sector is faced with problems related to inadequate capacity expansion, inefficiency of existing plants, transmission and distribution losses and bad financial health of State Electricity Boards, all contributing to the rising gap between demand and supply of power.

Source: Xinhua