The boom continues. The Central Statistical Organisation's (CSO) figures released on Thursday showed industrial production achieved a record growth of 14.4 per cent in November 2006, the highest ever in a decade. Overall industrial growth in the first eight months (April-November 2006) of the current financial year was up 10.6 per cent as compared to 8.3 per cent in the corresponding period last year.
However, inflation continued to be a source of worry, poised at 5.95 per cent during the week ended January 13, a marginal drop from a two-year high of 6.12 per cent in the previous week. It still remains higher than the Reserve Bank of India's projection of 5 to 5.5 per cent.
Finance Minister P Chidambaram confirmed to newsmen that the slashing of Customs duty twice during the past week had been aimed at easing inflation. "We would have done it anyway on February 28, budget day. Having regard to inflation we advanced it," he stated.
The government on Wednesday had reduced customs duty on edible oils by up to 12.5 per cent as a measure to contain the rise in the rate of inflation. The duty on refined bleached and deodorised palm oil, palmolein and other refined palm oils have come down to 67.5 per cent from 80 per cent.
"As part of its strategy to keep the prices of essential commodities under check, the government had exempted customs duty on wheat and pulses. Today's reduction is the second such for edible oils," said an official statement.
On Monday, the government had announced a cut in customs duty on a host of items including cement, steel, aluminium and inorganic chemicals.
Economists expected the inflation rate to ease marginally in the coming weeks as the fiscal measures announced this week bring down the pressure on the overall price line.
"I expect the rate of inflation to ease a bit in coming weeks as the customs duty cut would have an effect. However, I still expect it to remain closer to 6 per cent", said Saumitra Chaudhuri, economic advisor at rating agency and consultancy firm, ICRA.
Former RBI governor Dr Bimal Jalan echoed his view. "The fiscal measures would diffuse the inflationary pressures", he said.
The manufacturing sector, which has the highest weight in the Index of Industrial Production basket, has shown an impressive performance with a robust growth of 15.7 per cent in November 2006. It had grown by 16.1 per cent in May 1996 and in the recent past the closest high growth has been registered in July 2006 at 14.3 per cent. The mining and quarrying sector has shown a growth of 7 per cent in November 2006, while electricity sector has registered a growth of 8.7 per cent.
Among the use-base economic sub-groups, capital goods have registered an impressive growth of 25.3 per cent in November 2006. The intermediate goods have also recorded a high growth of 16.7 per cent.
Jalan said public investment needs greater push, with focus on implementation, to sustain the growth momentum in the manufacturing sector.