New Delhi, Oct. 12: Industry grew by a robust 10.7 per cent in August, easing fears of a slowdown following the tepid 7.5 per cent growth the month before.
In August, a fall in demand for consumer goods, because of monetary tightening by the Reserve Bank of India, was more than offset by demand for capital goods and a pick-up in mining activity and electricity generation.
The August growth is higher than the forecast of 9.6 per cent made for the month by the Institute of Economic Growth, a think tank for the finance ministry.
Industrial output rose 11.3 per cent in 2006-07, the strongest in 11 years. Since then it has started slowing down because of higher borrowing costs for business.
Exporters have been hit by a 12.5 per cent rise in the value of the rupee against the dollar this year. The rupee touched 39.27 per dollar yesterday, its strongest since March, 1998.
For the five months, April to August, industry growth slipped to 9.8 per cent from 11 per cent in the corresponding period of the previous year.
Manufacturing grew by 10.4 per cent in August, down from 11.9 per cent a year ago.
In mining, the growth rate improved significantly to 17.1 per cent against a decline of 1.7 per cent in the corresponding month last year.
Electricity generation during August grew by 9.2 per cent compared with 4.1 per cent a year ago.
Capital goods enjoyed a growth of 30 per cent over 16.6 per cent a year ago.
On the negative side, the growth rate of consumer durables declined by 6.2 per cent against 19 per cent a year ago.
Basic goods and intermediate goods, however, recorded growth rates of 13.3 per cent and 12.3 per cent, respectively, against 4.8 per cent and 8.7 per cent a year ago.
In terms of industries, 13 out of 17 groups showed growth during August. Wood and wood products had the highest growth of 21.1 per cent, followed by basic metal and alloy industries (17.5 per cent), jute and other vegetable fibre textiles, except cotton (16.1 per cent).
Finance ministry officials were upbeat on prices, with inflation in the last week of September falling to an almost-two-year low of 3.26 per cent.
“This is what we had been aiming at with our judicious policy of curbing inflationary trends through monetary initiatives yet not tightening the screws on lending too much to allow business to continue to grow,” department of economic affairs officials said.
“Fall in inflation rate is a very encouraging development. Now we can safely call for reduction in interest rate to bring about a multiplier effect on growth and employment,” Ficci secretary-general Amit Mitra said.
The rate of inflation stood at 5.41 per cent a year-ago.
Prices of pulses such as moong and urad declined by 1 per cent during the week. Tea prices, which declined by 4 per cent, and edible oils (0.1 per cent) also helped to bring down inflation .