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Nervous India Inc slashes domestic market projections

Swati Prasad, Partha Ghosh & Bhupesh Bhandari

Stung by the indifference of the Indian consumer, India Inc has drastically scaled down its projections of the domestic market. The cuts in the projection for 2005 range from 14.72 per cent in the case of refrigerators to 51.35 per cent in the case of colour televisions.

A working group report on iron and steel in 1996 had projected the demand for finished steel to be around 48.8 million tonne by 2006-07. However, Arvind Pande, chairman, Steel Authority of India Ltd said: "Keeping the current consumption trend in mind, the projected level of steel consumption in 2006-07 may be put at 40-41 million tonne."

The projections went haywire as a cash-strapped government clamped down on its capital investments, while private investment in key steel consuming sectors like power and construction did not take off. Little wonder, out of the 15 odd large steel projects announced a decade ago (10 of them were announced in Orissa alone), only a handful have seen the light of the day.

In the wake of liberalisation, most companies had made lofty projections as India was expected to go the China way. Most companies assumed an annual GDP growth of over 8 per cent for the years to come.

While China continues to clock double-digit GDP growth, the Indian economy's growth in the last few years has been barely around 6 per cent. The talk of a large middle class too has proved to be a myth-companies have been way off the mark in anticipating their purchasing power.

After steel, CTVs were the next hyped-up sector in the initial years of reforms. Thanks largely to the stiff excise rates, the companies have not been able to break the price barrier that would have made the market boom in line with projections. The 2005 projections have now been scaled down by more than half.

Same with automobiles. Says S Sandilya, chairman and group chief executive, Eicher Group: "It's common knowledge that all projections of the automobile industry (for all segments) have gone awry."

Car companies are now unwilling to make long term projections after their calculations for 2000-01 went haywire-against a projected 10 per cent rise, sales fell by 7.53 per cent.

From 0.5 million in 2000-01, the industry will have to grow at over 20 per cent to meet the 2005 projection of 1.1 million cars-a tall order, most accept. According to car producers, a projection of 0.8 million is more realistic.

Used to making projections on the basis of the government's Five-year Plan figures, businessmen are now looking at new models of forecasting.

"The old model is no longer relevant. We have to look at new models," says JK Industries managing director Raghupati Singhania. The experience has also made businessmen wary of making long term projections.

"We still do long term projections, but we now go public with at best annual projections," Indo Rama Synthetics (India) president (polyester) A K Chadha says.

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