2.4% IIP growth rate in Jan suggests good turnaround: Montek

He said the positive growth in industrial production indicates that the economy has bottomed out and is back on track.

Last Updated: Mar 12, 2013, 21:55 PM IST

New Delhi: Describing the 2.4 percent industrial growth rate in January as an indication of "very good turnaround", Planning Commission Deputy Chairman Montek Singh Ahluwalia on Tuesday said growth would show improvement in subsequent months.

"The turnaround is very good. I wouldn't call it strong growth, but it does bear out...That the economy has bottomed out and is now on the way out. But I would hope that in the subsequent months it will show more robust growth," Ahluwalia told reporters on the sidelines of an event here.

He said the positive growth in industrial production indicates that the economy has bottomed out and is back on track.

"...It suggests that the bottoming out is over and we are hopefully getting back. But I wouldn't call it a strong recovery yet. In our own estimates of 2012-13, obviously they did not anticipate that there would be a strong recovery in the third and the fourth quarter. So, it's really in the next quarter that the hope is that we would see some response," he said.

The industrial output measured by the Index of Industrial Production (IIP) grew by 2.4 percent in January on account of better performance by manufacturing and power sector. IIP showed contraction in November and December.

When asked if the industrial output growth in January was the outcome of recent government initiatives, he said impact of those steps are yet to be fully felt.

"You know it's almost impossible to judge that. But there is no doubt that a lot of the impact would be the result of steps taken really from last September. But I don't think that the impact of those steps is fully felt yet."

He said many of the steps taken by the government, particularly for unclogging infrastructure projects, will show impact now.

"The cabinet committee on investment has met, they have discussed certain things. I believe that progress is being made. It is really in the next few weeks that we will see the result of that...Quite a lot of impact of intitiavtives taken so far is yet to be seen and will be seen," Ahluwalia said.

He, however, said retail inflation was still a concern which showed double digit growth at 10.91 percent in February.

"On the food side, inflationary pressure remains high. I mean that's a structural fact, the non-food inflation is down, food inflation remains high.

"...Demand has gone up because of rising income. Hopefully supply will respond. There are inefficiencies in marketing, which probably show up...But we will address that also."

On the issue of raising FDI cap in certain sectors, Ahluwalia said it would require support from opposition.

"Something we have to do through Parliament like raising the insurance cap, which I think is a very important (raising it) from 26 percent to 49 percent. But we will only be able to do it if the opposition agrees, because in the upper house, without their support or agreement, it can't be done."