New Delhi: Growth in industrial production almost doubled to 13.8 per cent in July from the year-ago level on robust expansion in capital goods, and doused fears about any slowdown in demand.
The stellar numbers, the Planning Commission believes, would help the economy beat the government's overall growth projection of 8.5 per cent for this fiscal. But analysts disagree. In fact, most analysts had predicted factory output to fall to single digit in July as a result of waning demand.
Finance Minister Pranab Mukherjee said he expects average industrial growth this fiscal to be between 12 per cent and 13 per cent, given the good showing of the labour-intensive manufacturing sector.
Manufacturing sector output grew 15 per cent in July against 7.4 per cent a year ago and mining by 9.7 per cent compared to 8.7 per cent.
But it was capital goods - used by the manufacturing industry - that mainly fuelled growth, as production rose by a strong 63 per cent in July against just 1.7 per cent a year ago. Consumer durable goods production was also up 22.1 per cent, the same as in July 2009. But electricity generation grew at a slower 3.7 per cent against 4.2 per cent a year ago.
Industrial growth stood at 7.2 per cent in July, 2009 and was 11.4 per cent during the first four months of this fiscal, against 4.7 per cent in the year-ago period.
"These July figures, I would say, are better than what I had expected. On the whole, taking together April-July, it thus suggests that we are on track at least to achieve the growth rate target... In fact, there may be a good case to marginally increase it (GDP target)," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.
"This is almost double the market expectations," Crisil chief economist D K Joshi said.
However, experts are not as enthused, saying that the July figures may not sustain and could prove to be a blip.
Said Joshi, "I don't see the IIP growth beyond nine per cent this fiscal. These high numbers are not sustainable."
To a query from reporters on whether the Reserve Bank may further tighten rates in the face of rising inflation, the Finance Minister said "The government and RBI are watching.
Let's see. We will take actions as the situation demands." The Reserve Bank is slated to review its monetary policy stance on September 16, amid expectations that it may raise key rates to tame near double-digit inflation.
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