Amid the Reserve Bank of India expressing doubts over the efficacy of industrial data, a top adviser to the Finance Ministry said on Friday manufacturing is on buoyant path that will keep Indian growth story going in the medium to long run.
". . . I get the sense that the manufacturing sector growth of the last months is not just a one time correction but the start of a new trajectory for Indian manufacturing," chief economic adviser Kaushik Basu told reporters in New Delhi.
He said if services and farm sectors, which are performing below capacity, also return to their full capacity, Indian growth will be quite robust for some years to come.
The comment assumes importance, since the RBI on Thursday expressed doubts over the efficacy of industrial growth data in mirroring the ground reality.
"Although the year-on-year (industrial) growth rate for the first four months of the year remains robust at 11.4 per cent, the high volatility over the past two months raises some doubts about how effectively the index (of industrial production) reflects the underlying momentum in the industrial sector," RBI had said in its mid-quarterly review.
Basu said medium to long run economic growth prospects are good because of robust manufacturing.
He stuck to the Finance Ministry's growth projections of 8.5 per cent this fiscal. However, he added that the second quarter figures will be below even 8.5 per cent, while the third quarter will witness more than 8.8 per cent economic expansion, witnessed in the first quarter.
"Where we have had unequivocal success with policy is in the case of growth. . . . The reason why the medium to long term growth prospects are even better for India is that the manufacturing sector is experiencing a buoyancy rarely seen before," Basu said.
While industrial growth accelerated to 13.8 per cent in July, belying all expectations of slow down, manufacturing, constituting around 80 per cent of industry, rose by 15 per cent that month.
In the first four months of this fiscal, the industry grew by 11.4 per cent, while manufacturing activity was up 12.2 per cent.
In another context of new series of inflation, he said there is no dodging in figures. On other two sectors of the economy, Basu said services and agriculture sectors are currently performing below capacity.
He attributed below capacity utilisation in services to 'reasons beyond control'.
By this, he meant fragile global demand for services.
"As these sectors return to their full capacity performance, this, along with the new trajectory of manufacturing growth, is likely to put India on a very good wicket for some years to come," he said.
Indian economic growth slowed down to 6.7 per cent during 2008-09, after nine per cent in the previous three fiscal years, as deepening global financial meltdown impacted it.
After stimulus measures, growth recovered to 7.4 per cent during 2009-10.
Even after partial withdrawal of stimulus, growth stood at 8.8 per cent in the first quarter of this fiscal.
