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Economy logs growth 8.1%

Belying negative projections, the Government presented an impressive economic report card that shows that the economy grew 8.1 per cent in the first quarter of the current fiscal, against 7.6 per cent in April-June 2004.

The higher growth in the initial months of the current fiscal was brought about by a buoyant manufacturing sector, which grew 11.3 per cent, and the services sector, which continued with its robust performance.

The Central Statistical Organisation (CSO) also released the quarterly estimates of gross domestic product (GDP) for April June 2005. According to this data, the quarterly GDP at factor cost at constant (1993-94) prices for the first quarter of the current fiscal is estimated Rs. 3,82,534 crore (Rs. 3,53, 717 crore in Q1` of 2004-2005) reflecting a growth rate of 8.1 per cent over the corresponding quarter of previous year.

Exuding optimism over the growth prospects for the rest of the year, the Finance Minister, Mr. P. Chidambaram, said, “In the medium term, my goal is to grow at over eight per cent. This would require higher savings and investment rates,” he said, reacting to the GDP numbers released, and further added that the aim should be to make India the fastest growing economy in the world. We are now the second fastest economy in the world (after China). We must aim to be the fastest growing.

Natural rubber hits record high

The natural rubber market created a landmark by achieving highest price ever recorded in the month of October in the history of rubber trading in India. On 10th October the price of benchmark grade, RSS-4, has galloped to Rs. 65.50-66 a kilogram, which is a record for the month of October. There is spurt is prices of other grades too, and price of ISNR-20 (crumb rubber) is at Rs. 64-65. As rubber production is at its peak during October-December, prices are normally at rather lower levels than those during other months of a year. But year 2005 has offered a different story altogether in the month of October.

During the first week of October 2004, the price of RSS-4 grade was Rs. 52 and that of ISNR-20 was Rs. 50 only. It is the increase in export demand that has pulled up the price line to new higher levels.

Export demand steamed from the continuous spurt in prices in global markets. Traders said export demand is higher for both RSS-4 and ISNR-20, but there is shortage of good-quality rubber in the market.

N Radhakrishnana, president Cochin Rubber Merchants Association. Said though production is normal now, increase in demand both domestic and overseas- has made the market bullish.

While the average production in October is to the tune of 75,000-80,000 tonne, the average consumption is 70,000 tonne. But as global prices are at higher levels, there is export demand to the tune of 10,000-15,000 tonne during October. It is projected that there would be a shortage of 5,000-10,000 tonne in October alone which is the basic reason for the spurt in prices.

Traders said a large number of them could not give delivery during the first week of October against orders in September due to short supply. It is estimated that during April-September 20, total exports were 13,470 tonne. But traders said in October would increase to 10,000-15,000 tonne.

The year 2005-06 have witnessed commendable hikes in natural rubber prices, with the highest price of Rs. 70 being recorded on July 25.

Goodyear to cut costs

Goodyear Tire & Rubber Co. said it plans to cut costs by up to $1 billion by 2008, closing plants and importing more materials from Asia to offset high materials costs, pension obligations and the effects of an uncertain global economy.

Goodyear, the largest US tyre maker, said it would cut costs by $750 million to $1 billion over the next three years, taking cash charges of $150 million to $350 million for the restructuring, which will include selling more non-core assets.

“Our turnaround is on tract and will continue to evolve,” the Chief Executive, Mr. Robert Keegan, Said in a statement. Goodyear expects to cut high-cost manufacturing capacity by 8 per cent to 12 per cent to generate savings of about $100 million to $150 million per year. It did not say how many plants it would close or where they are located.

After a rough 2002 and 2003 Goodyear has been working to turn around its business by focusing on products, dealer relations, cost cutting and investments in more profitable areas of its business.

That helped the Akron, Ohiobased company improve its North American Operations in the last two years.

Goodyear reported a profit in 2004 after losses totaling more than $2 billion over the previous two years sparked a previous cost cutting plan of plant closings, job cuts and debt reduction.

But raw material costs are increasing, and the company is facing high pension obligations and debt levels, it said. Rising oil prices in particular have initiated the cost of synthetic rubber and of operating plants and shipping products. Steel prices and natural rubber costs are also up.

Goodyear said it wants to improve segment operating margin to 8 per cent for the total company and 5% for its key North American tyre unit.

India set to match Chinese might

The Indian economy has just inched closer to the Chinese economy. The Indian industrial sector has recorded a double-digit GDP growth of 10.3% , which, most importantly, is less than a per cent of the Chinese industrial sector’s GDP growth.

China has always been considered the dominant mjanufacturing sector and the industrial hub of the world, but the Indian manufacturing GDP sector has recently recorded a 11.4% growth. The manufacturing sector has been instrumental in increasing India’s industrial GDP as well as closing the gap between GDP growth rates of India and China.

Higher global demand for Indian manufacturing goods, higher purchasing power within the country and increasing internal demand for manufactured goods are some key reasons for the improved performance of the manufacturing sector. Of course, the Chinese manufacturing sector remains much larger in absolute terms.

Good performance by the manufacturing sector in the index of industrial production is a clear reflection of the increase in production in the manufacturing sector.

As a mater of fact the manufacturing sector has been one of the key driving forces of the index of industrial production, and the overall production levels in the country. The index of industrial production is a measure of the overall levels of production taking place in the country, and the sector wise production as well.

Greater internal demand for manufactured products has also led to the strong performance of the manufacturing sector.

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