Industry shrinks again; Govt hopeful of faster economic growth

New Delhi, Feb 12 (PTI) India's Industrial production
declined the most in over 16 years in December belying
optimism that followed a stimulus package, but the Indian
government said domestic demand and reforms will help the
economy sail faster than others.

With inflation returning to the comfort zone of below five
per cent, the government and Reserve Bank of India (RBI) have
more room to employ fiscal and monetary measures to revive the
industry and achieve the targeted above 7 per cent economic
growth.

"There is a need to sustain our foreign trade, revive
foreign investments and generate domestic demand in order to
maintain our growth rates," said India's External Affairs
Minister Pranab Mukherjee, who also holds charge of finance
portfolio.

Mukherjee also said India would grow by 7 per cent during
2008-09 in such times, echoing views expressed by President
Pratibha Patil in her address to the joint sitting of
Parliament.

Even as there are hopes for yet another official stimulus
to boost the economy in the interim budget, industrial
production declined by two per cent in December. It had
earlier contracted in October 2008, but returned to post a
modest growth in November.

The fall in Index of Industrial Production means that
overall economic growth of GDP at 7.1 per cent, projected
officially for the current fiscal, may also have to be revised
downwards, economists said.

Economists also saw the need for tax cuts in the interim
budget on February 16 and rate cuts by the Reserve Bank to
boost slowing down demand.

"In December, we were expecting that the situation will be
unsatisfactory that is why the government has taken big
stimulus steps. In January we expect it to be better,"
Industry Secretary Ajay Shankar said.

"Even in the prevailing adverse global environment, our
economy, it is hoped, would still register a relatively high
growth rate," Patil said in her address.

GDP is officially pegged to grow by 7.1 per cent against
9 per cent in the last three years, but is still considered
good when most developed economies are facing recession.

"India's domestic demand can inject fresh momentum to our
economy," Patil said, adding that the fundamentals of the
economy are better than most others.

Mukherjee, who would be presenting the interim budget on
Monday, said that "India faces special challenges from the
international financial crisis... we have to address this on
many fronts."

The government came out with two stimulus packages in the
recent past and according to Planning Commission Deputy
Chairman Montek Singh Ahluwalia, there is a need to continue
the stimulus efforts in the next fiscal. PTI TEAM
DEP