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Industrial growth may reach 3-4 per cent in 3 months: IEG

BS Economy Bureau

Industrial production has reached rock bottom and can only rise in the coming months. Industrial growth can reach three to four per cent in the next three months, says the monthly monitor for April released by the Institute of Economic Growth.

The expected reduction in domestic interest rates and the recent Budget proposals on amending labour laws and the small scale industries reservation policy are expected to boost industrial performance in the coming months.

In addition, the anti dumping duties on import of cheap consumer durables from China may also help the domestic industries to recover, the report states.

However, the existing demand side constraints and the removal of quantitative restrictions on all goods may restrain the growth of industry in the short run.

Based on index of industrial production data available upto February 2001, the institute has forecast the industrial growth rate over the next six months to be 2.43 per cent, 3 per cent, 3.9 per cent, 2.6 per cent, 3.8 per cent and 3.5 per cent respectively.

Money supply growth is expected to fall to around 16 per cent in the coming months while the prime lending rate is likely to fall to between 11 to 11.5 per cent for the next four months, the report states.

The institute has also forecast the wholesale price index based inflation rate to be 5-6 per cent in the next three months while the consumer price index may continue to grow at about 4 per cent.

The increase in the money supply and fall in production of both industrial and agricultural commodities would increase prices to some extent, but the cement companies decision to cut prices and removal of QRs will put a downward pressure on prices.

On the WPI based inflation, the IEG has said that based on data upto April, 2001, WPI based inflation will be 5 per cent in May, 5.32 per cent in June and 5.8 per cent in July.

Net foreign institutional investment inflows will be negative in April and May, the report states. Also given the declining growth of industrial production and 'not so good' rabi production, the current trend in exports may not be sustainable, the report states.

The institute predicts that based on data upto March 2001, average export growth will be 21.1 per cent while import growth will be 3.9 per cent between April-June 2001.

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