Centre for Monitoring Indian Economy expects industrial growth to slow to 4.5 per cent during 2003-04, due to adverse impact of drought on rural spending.

"We have assumed a below normal rainfall of 96 per cent of the long-term average as predicted by the meteorological department and adverse impact on rural spending to dampen the industrial growth prospects in the current financial year," CMIE said in a release in Mumbai on Thursday.

The automobile industry is likely to record a lower growth in this fiscal due to a slump in rural demand for two-wheelers. There is likely to be a 10 per cent decline in two-wheeler sales during the fiscal, the release added.

Two-wheeler sales had posted a "healthy growth" of 17.3 per cent in 2002-03 and 15 per cent in 2001-02, CMIE said.

CMIE, quoting its Industry Analysis Service study, said the Light Commercial Vehicle segment would also record a decline in sales in the fiscal. LCV had registered an unprecedented growth of 27 per cent in 2002-03, it said.

Medium and heavy commercial vehicles sales, which had posted a robust growth of 27.6 per cent in FY'03, are also expected to slow down in 2003-04, CMIE said, adding the sector has already witnessed a slowdown in March 2003.

The steel and cement sectors are also likely to post a lower growth in output this fiscal, even though the impact of infrastructure spending is expected to continue during most part of the current year, CMIE said.

According to CMIE finished steel output would grow by four per cent after recording a growth of six per cent between April 2002 and February 2003.

The economic think-tank expects cement production to be around seven per cent during the current fiscal, a decline from 8.8 per cent growth posted during the previous fiscal and 9.7 per cent growth recorded in 2001-02.

Steel prices have been rising mainly due to the demand from China, as 2008 Olympics is scheduled to be held in the country, CMIE said.

"Cement prices were weak during most of 2002-03, and the prospects of a rise in price depends on the monsoon", the release added.

The sugar production in India was "expected to decline or record no growth" during the fiscal, as sugarcane production may decline due to the drought. The oilseeds output was also hit, leading to decline in edible oil production, CMIE said.

CMIE expects the production index of food products to slow down "significantly" to around 1.6 per cent in FY04, compared to the 9.2 per cent recorded during April-February of FY03.

Contrary to its negative outlook, CMIE said the apparels sector was likely to "fare well for the second consecutive year" this fiscal. CMIE expects the sector to post "healthy" growth at 18-20 per cent in FY'04.