Domestic demand for goods and services in the country is likely to increase in FY'10 on account of a possible sharp decline in commodity prices globally and reduction in prices of branded goods, an economic think-tank has said.
"We expect a sharp fall in commodity prices globally and the reduction in prices of branded goods following the excise cut in India. This will help augment demand in 2009-10," the Centre for Monitoring Indian Economy said in its report on the state of the economy in New Delhi [ Images ].
Most of the demand-related problems, which the industry faced following the worsening of the global liquidity crisis in September 2008, were temporary in nature, the report said.
Besides, the prompt monetary measures taken by the Reserve Bank of India [ Get Quote ], consequent fall in interest rates and improvement in availability of credit are expected to create a conducive environment for demand to grow, it said.
"The global liquidity crisis has affected only a small section of the Indian industry, mainly the export-oriented industry," the CMIE report said, adding, "the rest have not been affected much by the global slowdown."
A major portion of the consumption demand in the country comes from the urban areas and Government employees, which are completely isolated from the global slowdown, the report said.
Rural India has seen four consecutive years of agricultural growth and hike in minimum support prices of many agro-commodities in the last two years.
In addition, sale of farmlands for industrial purposes has put more disposable income in the hands of farmers, the report said.