The worst may be over for the Indian manufacturing sector, which witnessed a six-year low in production growth at 3.8 per cent this May.

A survey by the Confederation of Indian Industry and Ascon for the April-June quarter reveals that almost half of the respondent companies recorded a growth rate in excess of 10 per cent.

A study by the Federation of Indian Chambers of Commerce and Industry projected a growth rate of 9.5 per cent for the sector in 2008-09.

Both the surveys point out that the Indian industry is adjusting its processes to counter rising input costs as well high interest rates. "However, the emerging situation needs to resolve itself soon, since the industry has only limited capacity to keep absorbing these cost escalations," said Chandrajit Banerjee, director general, CII.

According to Ficci, which surveyed 100 sectors, the optimistic growth projection for the current fiscal was on the account of industry's expectations of higher investments leading to capacity addition, increased mergers and acquisitions resulting in higher economies of scale, as well as focus on high-end and superior technology products.

Moreover, Ficci also expects a higher demand for high-end lifestyle products, entry of foreign companies and prospects of higher exports for many sectors.

National Manufacturing Competitiveness Council chairman V Krishnamurthy had recently told Business Standard that growth in the manufacturing sector should be allowed to fall below 9 per cent in 2008-09.

Industry experts project that industrial production in July will rise by around 7 per cent over the same month last year, making up for the low growth rate in the previous months of the April-June quarter.

The CII-Ascon survey found that out of the 100 sectors surveyed, seven reported a growth rate of over 20 per cent and while 40 sectors witnessed a production growth in the range of 10-20 percent in the first quarter of the current fiscal. Moreover, 32 sectors recorded a growth rate of less than 10 per cent and 21 sectors showed a decline.

The survey revealed that low linear density polyethylene, PVC, power cables and rubber footwear sectors grew by over 20 per cent in the first quarter, while power transformer, transmission line towers, electrical fans and industrial gases production grew by 10-20 per cent in the same period.

According to Ficci, sectors projected to see production growth above 20 per cent include frost-free refrigerators, DVD players, microwave ovens, specialty chemicals, power cables, earth moving and construction equipment, industrial valves, printing machinery, as well as body care products like cosmetics and deodorants.

'While the farm loan waiver scheme and the proposed salary hikes of government employees will help to generate more demand for manufactured items, Ficci is of the view that there is a need for stimulating consumption/ demand; reducing interest rates; and no further cuts in custom duty on manufactured goods,' the Ficci statement added.