Economy cruising; industrial output robust

Indian economy is on an upswing with industrial production posting its highest growth in a decade at 12.4 per cent in July, while inflation hovered at a moderate 4.77 per cent for the week ended September 23.

The record growth in the Index of Industrial Production is propelled by the consistent high growth in the manufacturing sector output, which rose by 13.3 per cent in July, Commerce Minister Kamal Nath said on Friday.

Manufacturing output had grown by 13.4 per cent in June and the previous closest high growth in the recent past was seen in June 2005 when the output rose by 13.2 per cent.

The data on industrial production comes on the heels of Indian economy displaying robust growth of 8.9 per cent in the first quarter of the current fiscal.

The July IIP figures indicate that the economy is likely to continue its robust growth in the second quarter as well, analysts said.

Finance Minister P Chidambaram recently said that besides big industrial houses, other players including small and medium enterprises should also chip in to make India a manufacturing hub at least in 12 activities.

He had assured that even if bank's non-food credit growth has to be moderated to curb any future inflationary pressure, credit to productive sectors would not be delayed or denied at reasonable rates.

In fact, inflation is moderate and stood at 4.77 per cent during the week ended September 23 and as such RBI may not increase key interest rates in its monetary policy to be announced later this week.

The Finance Minister had also said that increased industrial production would not put pressure on interest rates as liquidity in the economy is ample.

On a cumulative basis, IIP increased by 10.6 per cent during April-July 2006-07 as against 8.9 per cent in the same period last fiscal, according to the quick estimates of Central Statistical Organisation.

"The growth in July is the highest in ten years. The record growth has been propelled by the manufacturing sector, which rose by 13.3 per cent," Nath said.

During July 2006, mining and quarrying sector rose by 6.0 per cent, while electricity sector registered a growth of 8.6 per cent compared to the same month last fiscal.

Nath said the food products industry grew at the fastest rate of 26.8 per cent, followed by wool, silk and man-made fibre textiles at 25 per cent.

Transport equipment sector has shown a growth of 22.4 per cent, basic metal and alloy industries by 19.5 per cent and textile products at 17.3 per cent.

As per the use-based economic sub-groups, consumer goods sector grew by 17.9 per cent during July 2006, while the capital goods sector registered a growth of 15.4 per cent.