Comeback story: IIP in July surges 7.1%

NEW DELHI: Buoyancy in the production of consumer durables and capital goods helped industrial growth bounce back to 7.1% in July, from 5.4% in the previous month. However, the rebound was not enough to prevent slower industrial growth of 5.7% during the first four months of 2008-09 compared with 9.7% in the corresponding period last year.

Slower industrial production growth indicates that economic expansion is moderating due to the Reserve Bank���s tight monetary policy. In view of strong growth in consumer goods and 12.1% inflation, economists expect interest rates to harden further.

The main drivers of industrial growth, as measured by the Index of Industrial Production (IIP), were capital goods and consumer goods. The manufacturing sector, which has a weight of 79.4% in IIP, grew 7.5% in July 2008 against 5.9% in June 2008 but lower than 8.8% in July last year.

���IIP figures have shown significant improvement over the past few months. Since manufacturing has witnessed robust growth, there should be no further tightening of the monetary policy. The government should work on reducing interest rates. We foresee similar growth momentum in the coming months. We expect the consumer durables sector to grow at 20% in the future,��� Videocon Group chairman Venugopal Dhoot said.

Mining (10.4% weight in IIP) improved with growth of 5% in July 2008 against 3.2% in the corresponding month last year and 2.9% in June 2008.