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Govt disappointed by slump, hopeful of rebound

Govt expresses disappointment over the decline in industrial production but hopes rising demand during the coming festive season would arrest deceleration, reports Gaurav Choudhury.

business Updated: Sep 13, 2007 21:18 IST
Gaurav Choudhury
Gaurav Choudhury
Hindustan Times

A concerned government on Thursday expressed disappointment over the decline in industrial production but hoped rising demand during the coming festive season would arrest the deceleration.

Finance Minister P Chidambaram said the slowdown was "disappointing". "We will try to find out whether it is due to a mild slowing down or whether there is production cut back," he said.

Monetary tightening, an appreciating rupee and a high base of last year pulled down industrial growth to 7.1 per cent in July this year, from a high of 13.2 per cent a year ago, data released on Wednesday showed.

Growth in key infrastructure industries, which carries a weight of 26.7 per cent in the index of industrial production (IIP), also registered slower growth in July. Data released on Thursday showed infrastructure grow by 6.3 per cent, compared with 10.9 per cent in same month of 2006.

Chidambaram said demand would pick up during the festival season. "Now that the festival season is coming, there is reasonable expectation that the demand will pick up in the coming months. There is no evidence of slowdown in investment," he said.

"I am confident that this year will also (see India) achieve high growth. No conclusions can be drawn, either positive or negative, on the basis of week, two weeks or a month's figures," he said.

Commerce and Industry Minister Kamal Nath said the Reserve Bank of India should ensure that monetary tightening, aimed at controlling runaway inflation, does not impact the aggregate growth process. "Contraction in credit has achieved the purpose of controlling inflation, but we should ensure that growth is not impacted," Nath said on the sidelines of a conference on SEZs.

Nath was confident that the manufacturing sector would achieve the targeted growth of 12 per cent and exports would clock $160 billion during the year. He felt the slow down was more of a seasonal phenomenon. "July and August are difficult months and we will take a review in November. I am not too concerned because the slowdown is not because of any structural reason," he said.

First Published: Sep 13, 2007 21:08 IST