Date:13/09/2006 URL: http://www.thehindu.com/2006/09/13/stories/2006091307731600.htm

Business

High industrial growth not to impact interest rates, says FM

Special Correspondent

Manufacturing records robust performance; no SLR status for oil bonds

NEW DELHI: With industrial growth having touched a high of 12.4 per cent in July, Finance Minister P. Chidambaram said this would not necessarily put pressure on interest rates. The Index of Industrial Production (IIP) data released here on Tuesday by the Central Statistical Organisation (CSO) show that output in all sectors, including manufacturing, recorded a buoyant growth and is the highest for July since June 1996.

Mr. Chidambaram told reporters here on Tuesday that non-food credit was growing by 33 per cent, but there was ample liquidity. He did not, therefore, expect high industrial growth to necessarily impact interest rates. He noted that in the manufacturing sector, several areas recorded over ten per cent growth, including textiles, manmade yarn, paper, basic chemicals and transport. The manufacturing sector of the IIP, which has the maximum weightage in the index, rose by 13.3 per cent in July compared to six per cent in the same month last year.

The Finance Minister was happy that mining and electricity, which had slowed down last year, had now picked up sharply. These two sectors recorded 8.6 and six per cent, respectively, in July compared to a dip in output in the same month last year. Regarding the Rs. 14,150-crore worth of bonds for the oil sector companies, Mr. Chidambaram said these would be issued this month.

At the same time, he ruled out the SLR status for oil bonds, which implied that banks would not be able to subscribe to the bonds as part of the requirement that they invest 25 per cent of their liabilities in approved securities among other things.