The country's industrial output grew by 13.8 per cent in July, buoyed by a 63 per cent growth in capital goods output and prompting the debate whether the Reserve Bank of India (RBI) would execute another round of rate hike next week during its mid-quarter monetary policy review.
Finance Minister Pranab Mukherjee termed industrial output growth as "extremely encouraging" and said he expects full year industrial output growth to be around 12 to 13 per cent. "It indicates long run optimism on the part of Indian industry and this, once again, underlines my own optimism concerning the growth of the Indian economy."
"The government and the RBI are watching. Let us see. We will take actions as the situation demands," he said.
However, some experts cautioned that the growth was not broad-based. Only four sectors — machinery and equipments, metals and rubber, plastic and petroleum — have contributed 72 per cent to manufacturing growth in July.
"There are a large number of sectors such as apparels, man-made textiles, leather, wood and chemicals that are employment intensive but are hardly growing. I think there is a need to address now the specific issues of these sectors both in the export and domestic market to make industrial growth broad based", said Amit Mitra, secretary general, FICCI.
Manufacturing, which contributes 80 per cent of the overall industrial output, grew by 15 per cent, and consumer durables output grew at 22.1, mirroring high demand of goods such as TVs and refrigerators.