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Proactive Steps Needed To Sustain Industrial Growth

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Enthused by the rise in industrial output and declining inflation, Indian Finance Minister Pranab Mukherjee on Thursday indicated that the government will take proactive steps to sustain the growth momentum.

He also exuded confidence that the overall inflation will drop to 6-7 per cent by March-end on the back of declining food prices, which fell for the second consecutive week.

Factory output, as measured by the Index of Industrial Production (IIP), has seen growth in recent months, with the exception of October in which it contracted.

"If this trend in the numbers continues, perhaps we can expect to have a better performance (during December-March)...

But for that, we need to take some proactive actions about which I cannot comment on right now," he said.

He further said, "We need to build on this recovery with a stronger performance of capital goods and therefore investments, to recover the growth momentum in the remaining months of the current financial year. The policy focus will have to be accordingly adjusted."

As food prices continue to decline, Mukherjee said he was confident inflation would continue to moderate.

Food inflation, as measured by the Wholesale Price Index (WPI), stood at (-)2.90 per cent for the week ended December 31, 2011. It was at (-)3.36 per cent in the previous week.

"The headline inflation should be between 6-7 per cent by end March 2012," Mukherjee added.

"Therefore, both on the wholesale price front in respect of primary articles, food articles and positive growth in IIP, (in) the backdrop of negative growth in October, this is a good sign," Mukherjee added.

Headline inflation, which also factors in manufactured items, fuel and non-food primary items, has been above the 9 per cent-mark since December, 2010. It stood at 9.11 per cent in November, 2011. The headline inflation numbers for December are scheduled to be released on Monday.

With inflation declining, all eyes are on Reserve Bank's January 24 monetary policy review. Industry is expecting RBI to announce cut in interest rates.