India to grow at 8.5% in FY11 despite poor IIP data: Montek

Pinning hopes on smart recovery in the farm output, the Planning Commission today exuded confidence that the country would clock over 8.5% economic expansion in 2010-11 despite moderation in industrial growth.

According to Planning Commission Deputy Chairman Montek Singh Ahluwalia, more than the anticipated growth in the farm sector will make up for the shortfall in the industrial output.

"Yes, it will be because I think agriculture growth will be higher than the earlier forecast (of 5.4%). I don't think that (industrial growth below 8% level) will make a difference," he said when asked if the current level of industrial growth will be sufficient to achieve the projected 8.5% GDP growth for 2010-11.

The Central Statistical Organisation's advance estimates indicate that agriculture and allied sectors are expected to grow at 5.4% in 2010-11 compared to 0.4% in the previous fiscal. It has also pegged the economic expansion at 8.6% in 2010-11.

Earlier, Ahluwalia had said that an annual industrial growth of 8-9% was necessary to achieve the targetted economy growth.

As per the provisional data released here, index of industrial production (IIP) has grown by 7.8% during April-February period in 2010-11 compared to 10% in the same period in the previous fiscal.

The industrial growth has been showing a steady declining trend since it peaked at 15.08% in July.

The IIP number slipped to 6.9% in August and 4.4% in September. Some ray of hope was seen when the IIP growth crossed 11% in the month of October. But after that it has declined significantly.

The industry grew by 3.6% in November and 2.53% in December. Despite the marginal recovery in January and February with IIP growth at 3.9 and 3.7%, respectively, there have been fears that annual industrial growth may lag behind the target and drag the economic growth.

But now the unexpected spurt in farm production may fill for the gap created by slow industrial activity.

Meanwhile, Ahluwalia has expressed hope that industry would record a robust growth of 9% during the current fiscal.

"In 2011-12 we can get growth rate of industry, which is something of the order of 9% or so," he added.

On farm sector growth, Ahluwalia said, "It is not possible to repeat the agriculture growth rate (of 5.4% of last fiscal) in 2011-12, as you will be seeing a base level effect also."