Sunday, October 2 2005 12:00 Hrs (IST) - World Time -

New Delhi: Buoyed by industrial, services and agriculture performance, economy is likely to grow by 7.3 per cent in 2005-06 while high crude oil prices may put pressure on inflation rate.

"The economy would clock an impressive 7.3 per cent GDP growth for 2005-06, at the back of strong prospects of kharif production and reasonably buoyant industrial and services sector performance," Confederation of Indian Industry said in its state of economy report.

CII expects agriculture to grow at 3.2 per cent in this fiscal compared to 1.1 per cent recorded in 2004-05.

Increase in area under sowing and improved South West monsoon have also aided the recovery in the progress of kharif sowing, leading to an improved kharif prospects for 2005-06.

Industry's performance was better than expected with Index of Industrial Production growing by 9.3 per cent in April-July this fiscal.

"A strong growth in non-food credit, growth in capital goods production and imports are perhaps the factor supporting sustained growth for the industrial sector," CII said.

However, the report cautions about emerging constraints reflected by slower production in core sectors.

Sectors that are pulling down the growth rate are crude petroleum, petroleum products and finished steel.

The chamber expects inflation to be on the higher side of its 5-5.5 per cent projections due to rising crude oil prices.

The report says it is important to depoliticize the issue of hydrocarbon pricing by actually dismantling administered price mechanism combined with a policy to make kerosene available at affordable prices.