Industrial output nearly doubled to 13.8 per cent in July, dispelling fears of a dip in demand and giving an impetus to achieving 8.5 per cent economic growth this fiscal.
The Index of Industrial Production (IIP) data for July, released on Friday, showed that the output of capital goods, used by the manufacturing industry, soared 63 per cent from 1.7 per cent a year ago. The manufacturing sector output grew 15 per cent in the month against 7.4 per cent a year ago, setting at rest doubts on economic expansion growth.
The industrial growth in July last year was 7.2 per cent.
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Official data released last month put economic growth in the April-June quarter, based on actual expansion without accounting for taxes, at 8.8 per cent. But GDP growth at market price, which reflects the value of production or services, including indirect taxes, was just 3.65 per cent.
Finance Minister Pranab Mukherjee said industrial expansion was expected to be around 12-13 per cent this year. The manufacturing sector, which generated jobs, was performing well.
Asked whether the Reserve Bank would further tighten the monetary policy to combat inflation, he said, “The government and the RBI are watching. Let us see. We will take actions as the situation demands.''
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The overall inflation for July was 9.97 per cent, while figures for August are expected next week. Food inflation shot up to 11.47 per cent towards August-end from 10.86 per cent in the previous week. Production of consumer durable goods was also up 22.1 per cent, same as in July 2009. But power generation grew at 3.7 per cent against 4.2 per cent a year ago.
Most analysts had predicted the factory output to fall to single digit in July as a result of what they perceived to be waning demand.
“The July figures, I would say, are better than what I had expected. On the whole, taking together the April-July period, it 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 the GDP target,'' Planning Commission Deputy Chairman Montek Singh Ahluwalia said.