Industrial output grew in July, driven by domestic demand and looser credit. Now inflation is becoming a risk parliament will start to debate tomorrow as requested by the opposition.

New Delhi (AsiaNews/Agencies) – India’s industrial output surged in July, driven manufacturing. Pressures are growing on the Reserve Bank of India to raise interest rates as bond yields touched a new high. Experts warn though, the government must contain rising inflation.

The Purchasing Managers’ Index rose to 57.6 from 57.3 in June, key economic observers said. A reading above 50 indicates expansion, and the latest figure show faster month-to-month growth.

According to official data, bank credit has expanded and automobile sales are up, especially by local buyers, all signs of growing domestic demand and confidence in the future.

Tata Motors, India’s leading truck maker, reported sales in July climbed 41 per cent, while motorcycle maker TVS Motor Co. yesterday said its sales grew 35 per cent last month.

Reserve Bank of India Governor Duvvuri Subbarao last week increased rates for the fourth time in five months and pointed to capacity constraints building up in industries.

The governor said India’s economic recovery is “firmly in place and strengthening.”

In India, bank lending to companies and individuals grew more than 21 percent in the year through July, the fastest pace since January 2008, another sign of rising demand.

Observers now warn that inflation might follow the upward trend, especially in food prices, with negative effects on overall economic growth. Hundreds of millions of poor or less well-off people could be penalised, further aggravating the gap between haves and have-nots.

Last week, Subbarao raised India’s growth forecast to 8.5 per cent from 8 percent for the year ending 31 March. He projected inflation may accelerate to 6 per cent during the period, from 5.5 per cent estimated earlier.

Some analysts expect prices to rise even more, especially those for food and basic necessities.

Opposition parties last week asked for a debate in parliament on inflation. Faced with the refusal of the government side, they blocked parliament for the whole week.

“It is dismaying to note that the handling of the economy by the government has been totally reckless,” Nitin Gadkari, president of the main opposition Bharatiya Janata Party, said. “The government does not appear to be in control” or capable of managing the economy.

Today parties agreed to discuss the issue tomorrow in the Lok Sabha (lower house) and on Wednesday in the Raiya Sabha (upper house).

Many are waiting to see the showdown because experts have pointed out on several occasions the government’s difficulty in reconciling industrial growth and manageable consumer prices.

• india
• economy
• industrial
• growth
• manufacturing
• inflation