India Focus

S t r a t e g i c    A n a l y s i s    a n d    F o r e c a s t s

Vol 4, No 1

January 1999

Politics    •    Business        Economy    •    Society        Culture    •    Diplomacy

Economic Summary


Corporate Results: Feeble Signs of Revival

Corporate results for Third Quarter of the financial year 98-99 are now coming in, and even though there was only a small increase in overall sales growth, along with a decline in net profit growth, other figures perhaps indicate the prospect of industrial revival in the later part of this year. It is significant that, for the first time in two years, major public sector units and large companies are reporting lower labour costs and "other income" as a percentage of sales. This indicates that past efforts at trimming and rationalization are beginning to take effect.  Also of significance is the fact that the capital goods sector, a primary indicator of industrial activity in the pipeline, grew by 10 percent in the first nine months of this FY.  Overall, we expect industrial growth to pick up over the next few months, and this will be reflected in a bounceback in GDP growth in FY 99-2000 which will most likely be in the band of 5.3 to 5.5 percent.

Brief Budget Forecast

1) The thrust of the budget will be to contain the growing fiscal deficit, currently estimated to be more than 6 percent. But there is limited scope of controlling major government expenditure, thus putting pressure to raise revenue. The budget will likely promote greater disinvestment in public sector units.

2) There will be no major changes in direct taxes. Import duty on selected items, such as textiles, consumer electronics, white goods, chemicals and plastics will be increased, and excise duties on many engineering and high-value goods will be rationalized. The list of items on zero import duty will be narrowed. The budget will be largely tax-neutral for most companies.

3) Infrastructure, housing, construction and food processing activities will get significant tax incentives.

4) Stock indices are unlikely to rally after the budget. Capital and stock markets will significantly improve only by Q3 ‘99, and that too if there is no immediate prospect of new elections.

Other Sections in January 1999 Issue

Industry Forecast: Part 1

Consumer Goods
Pharmaceutical & Health Care
Industry Forecast: Part 2

Oil & Gas
Industry Forecast: Part 3

Tourism & Aviation
Mining & Metallurgy
Ports & Highways
Political Trends Anti-Christian Agitation
Analysis & Implications
Economic Summary
(including Budget Forecast)

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