‘No slowdown seen in factory output growth’

‘No slowdown seen in factory output growth’

New Delhi: There are no signs of a slowdown in industrial output growth, finance ministry’s chief economic adviser Kaushik Basu said on Thursday.

Basu’s comments come just a day ahead of the release of July factory output data, which probably picked up to 7.7% from a year earlier, according to a Reuters poll. Recent macro-economic data from Asia’s third-largest economy have been subdued. The index of industrial production (IIP) rose 7.1% in June, its slowest pace in 13 months, while July’s headline inflation WPI eased just below 10%, after staying in double digits for five straight months.

“On industrial output, I have to say I am not seeing signs of slowdown," Basu said.

Though market opinion seems divided on the possibility of a rate hike by the Reserve Bank of India (RBI) in its 16 September policy review, traders widely expect the central bank to raise policy rates by a further 50 basis points (bps) before end-2010.

Basu’s comments are at loggerheads with those made earlier in the day by the Planning Commission deputy chairman Montek Singh Ahluwalia.

“We know that industrial growth is going to slow down," Ahluwalia said.

Basu also said that strong industrial output growth and better farm output will push up India’s growth to around 8.75% in the current fiscal year.

The chief economic adviser said that the consumer and the capital goods segments were performing well and that would ensure a strong growth in industrial output in 2010-11.

Good monsoons will lead to better farm output in the third quarter of this fiscal year compared with the previous quarters.

But, Basu conceded the current high food inflation was a concern. Food inflation accelerated in late August on flooding in some parts and supply lags in key commodities like pulses and milk.

Data on Thursday showed the food price index, which has a weighting of over 15% in the wider wholesale price index (WPI), rose an annual 11.47% in the week to 28 August, compared with 10.86% in the previous week.

The government is scheduled to release wholesale price index data for August on Tuesday.