Consumer durables, auto sector indicate slowdown

New Delhi, Apr 22 (UNI) Dissuaded by the rising interest rates, the consumer durables and automobiles sector witnessed a fall in its sales indicating slowdown of the economy, an industry chamber said today.

''The growth rate for the automobile industry sales was 0.8 per cent in March this year as compared to 20.4 per cent in March 2006. The consumer durables saw a decline with 1.6 per cent in February as against 20.3 per cent a year ago,'' the April 2007 issue of CII's quarterly 'State of the Economy' has revealed.

The chamber says these sect started demonstrating the impact of interest rate interventions at an early stage and therefore, are very significant.

However, India Inc have managed to remain unharmed with changes in the economy as the CII's analysis of 3,834 firms showed that net sales and net profit grew by 21 per cent and 74 per cent respectively compared to 18 per cent and one per cent recorded a year earlier.

''Much of the growth in sales is owing to domestic consumption having gone up on the back of a buoyant economy,'' it claim.

An analysis of the ratio of operating expenses to net sales by CII shows that it declined from 83.1 per cent to 80.5 per cent between October to December of 2005 and 2006, which happened despite the increase in ratio of material cost to net sales, indicating the growing competitiveness and efficiency of corporate India.

The net profit as a ratio of net sales registered an improvement for the corporate sector from 6.4 per cent to 9.2 per cent.

''In the next few quarters, however, it would be challenging for corporates to maintain this trend in profitability in view of increasing interest costs and resultant depression in demand,'' CII adds.

The study also shows that rising inflation and interest cost had failed to reflect adversely on the cost performance of the manufacturing sector companies.

Manufacturing sector has been able to improve its cost performance (as a ratio of net sales) in all items, on the other hand, the services sector has witnessed deterioration of performance in majority of the inputs, particularly in cases of raw materials and interest.

Meanwhile, CII has also projected that with interest rates rising, demand contracting and exports slowing down, manufacturing sector is also expected to slow down within a short period of time.

Accordingly, CII has forecast a 8.5 per cent GDP growth for the 2007-08 fiscal, looking at the global moderation of growth, inflation, falling demand as a result of spiraling interest rates, appreciating rupee and significant supply shortages in the global and Indian economy.

UNI