July IIP growth may remain in single digit

Industrial output growth is likely to be sluggish in the range of 7-8 per cent in July, the second month in a row this fiscal when the factory output may expand by only single digit, experts have said.

The Index of Industrial Production, which measures the industrial growth, for July is scheduled to be released by the government on Friday.

Industrial growth had slipped to a 13-month low of 7.1 per cent in June as manufacturing output dropped. It had fallen to single digit growth after being in double digit for eight consecutive months.

"We know the industrial growth is going to slow down. It is not going to be what it was. It is going back to base level," Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

He, however, exuded optimism that despite slowdown India's gross growth in this fiscal will reach the 8.5 per cent target set by the government.

"Agriculture growth, which in the first half was slightly lower, should be better in second half. I remain hopeful that 8.5 per cent (economic growth for the fiscal) is possible," Ahluwalia said.

The country's gross domestic product had grown by 8.8 per cent in the first quarter, against six per cent in the April-June period of last fiscal.

Global rating agency Crisil said it expected the IIP growth in July to be 7.6 per cent.

"Our forecast is of 7.6 per cent growth (in IIP figure for July). We believe sectors like auto and transportation would perform well, while cement will be weak. Growth of capital goods segment will also slow down," Crisil chief economist D K Joshi said.

He also attributed the low growth prospect to wearing off of the base effect.

"The growth during the first few months of 2009 was low which resulted in big jumps in growth rates in factory output in the same months of this year. Now that low base effect is no longer true," Joshi added.

Senior economist and former Director of Indian Council of Research in International Economic Relations Rajiv Kimar concurred with this view.

"The IIP growth may come down. The low base effect has withered away. And I am not sure how strongly the growth in manufacturing sector will perform," he said.