High growth here to stay: Rangarajan
13 Apr 2010
C Rangarajan, chairman of the prime minister's economic advisory council, said on Monday that the industrial growth figures of 15.1 per cent for suggest that high growth has stabilised and the economy will show strong expansion in the current year.
"Growth in capital goods has been very high," said. He expects the economy to grow 8.25-8.75 per cent this fiscal.
On whether the Reserve Bank of India should now raise rates, Rangarajan said RBI's action would depend on how it perceives inflation.
The February IIP numbers came in slightly below consensus estimates, but still managed to stay above the 15-per cent mark for the third straight month. While capital goods and manufacturing slipped month-on-month, consumer goods continued their good showing. (See: India's industrial production grew 15.1 per cent in February)
''It (index of industrial production) reflects that the process of growth is well stabilised and we should expect a fairly strong growth during the current year," Rangarajan told reporters in New Delhi. He further said that the IIP has shown a strong growth, adding "in some areas like capital goods, the growth rate is so high."
Industrial growth stood in February compared to 16.7 per cent in January and 17.6 per cent in December. At the same time, inflation rose to 9.89 per cent in February compared to 8.56 per cent in January, breaching RBI's projection of 8.5 per cent by March-end.
RBI, in its third quarterly policy on 29 January, raised the cash reserve ratio by 0.75 percentage points to 5.75 per cent.
Last month, the central bank raised its key short-term lending and borrowing rates by 25 basis points each as part of its tight money policy to combat inflation. The repo and reverse repo rates (short-term rates at which RBI lends and borrows from banks) were hiked to 5 per cent and 3.50 per cent respectively.
