Manufacturing to push economic growth: Basu

Amid the Reserve Bank expressing doubts over the efficacy of industrial data, a top adviser to the Finance Ministry today said manufacturing is on buoyant path that will keep Indian growth story going in the medium to long run.

"... I get the sense that the manufacturing sector growth of the last months is not just a one time correction but the start of a new trajectory for Indian manufacturing, " chief economic adviser Kaushik Basu told reporters here.

He said if services and farm sectors, which are performing below capacity, also return to their full capacity, Indian growth will be quite robust for some years to come.

The comment assumes importance, since the Reserve Bank had yesterday expressed doubts over the efficacy of industrial growth data in mirroring the ground reality.

"Although the year-on-year (industrial) growth rate for the first four months of the year remains robust at 11.4 per cent, the high volatility over the past two months raises some doubts about how effectively the index (of industrial production) reflects the underlying momentum in the industrial sector," RBI had said in its mid-quarterly review.

Basu said medium to long run economic growth prospects are good because of robust manufacturing.

He stuck to the Finance Ministry's growth projections of 8.5 per cent this fiscal.

However, he added that the second quarter figures will be below even 8.5 per cent, while the third quarter will witness more than 8.8 per cent economic expansion, witnessed in the first quarter.

"Where we have had unequivocal success with policy is in the case of growth ... The reason why the medium to long term growth prospects are even better for India is that the manufacturing sector is experiencing a buoyancy rarely seen before," Basu said.

While industrial growth accelerated to 13.8 per cent in July, belying all expectations of slow down, manufacturing, constituting around 80 per cent of industry, rose by 15 per cent that month.