The commercial vehicles industry is expected to witness a fall in production and sales in fiscal 2003-04, says a report by the Centre for Monitoring Indian Economy's industry analysis service.

Hema B Rajashekar, head of industry service, CMIE, said: "The implementation of the Golden Quadrilateral project (the amibitious road project to link the four metro cities in India) is now delayed. The commissioning of the project has been postponed from December 2003 to December 2005. This would reduce demand from this sector substantially."

Further, demand from the transportation of foodgrain is also expected to decline, she added.

The cyclical impact during 2003-04 would bring the year-on-year-on-year growth rates of the sector into the negative zone.

"The cyclical impact is more pronounced in the case of medium and heavy commercial vehicles as compared with light commercial vehicles," said Rajashekar.

The commercial vehicles industry grew handsomely during 2002-03, with a 27.6 per cent rise in the sales of medium and heavy commercial vehicles, and a 27 per cent jump in the sale of light commercial vehicles.

The growth was fuelled largely by the rise in demand from the Golden Quadrilateral project and by the need to transport greater amount of foodgrain to drought-hit areas during the year.

Given these factors, the CMIE expects sales of medium and heavy commercial vehicles to decline by around eight per cent. Sales of light commercial vehicles are expected to fall by around 5 per cent.

In the quarter ended March 2003, commercial vehicles companies recorded a decline in net profits, although sales growth rate improved to 17 per cent from 12.1 per cent during January-March 2002.

In the first three quarters of 2002-03, a sales growth of 21-25 per cent was recorded. Exports of light commercial vehicles declined sharply by 19.3 per cent to 292 units in April.

However, the CMIE report has forecast a bright outlook for the passenger cars industry. "Fiscal 2003-04 started on a promising note with sales growing by 33 per cent in April 2003. The passenger cars industry has had a tendency to record extraordinary rates of change," the report said.

"We believe that car sales growth for 2003-04 would be at around 15 per cent. The bouncing growth rates of the 1990s are a relic of the past and are unlikely to re-appear," Rajashekar said.

The car industry is poised for a rapid growth in sales because of aggressive pricing, new launches and low interest rates.

Unlike the two-wheeler segment, the car market would be less affected by the state of the monsoon or the shrinking rural markets. Lower cost of finances would be the major driver for growth.