India sees return to high growth as factory output surges

India's economy will soon return to high growth, the government pledged Monday, as official data showed industrial output expanded at its fastest clip in seven months and car sales surged.
President Pratibha Patil told the opening session of parliament that India's economic fundamentals "remain robust" and the government was confident it would "soon steer the country back to the high growth trajectory of 8.0-9.0 percent."
The economy is expected to grow by just 6.9 percent in the current fiscal year to March 31 -- the weakest pace since the 2008 global financial crisis.
Asia's third-largest economy grew by over nine percent for several years in the past decade and the Congress-led government has targeted a return to nine percent expansion in its latest five-year plan which starts in April 2012.
Experts have traditionally pinpointed nine to 10 percent growth as the minimum to substantially reduce the crushing poverty of hundreds of millions of Indians.
The government's confidence was buoyed Monday by figures showing an unexpectedly strong 6.8 percent industrial production rise in January from a year earlier that far outpaced analysts' forecasts of a 2.1 percent increase.
The numbers that defied interest rates at four-year highs and slowing global markets marked a "strong recovery" from December's 2.5 percent production growth, Finance Minister Pranab Mukherjee told reporters.
The output data, driven by an 8.5 percent leap in manufacturing, prompted analysts to review gloomy forecasts for overall growth but they warned against reading too much into the monthly numbers which are notoriously volatile.
"We are still bearish," said Glenn Levine, economist at Moody's Analytics. But "if this strength is maintained, we'll have little choice but to take our piece of humble pie and quietly lift the (growth) forecast."
The output figures coincided with data showing new car sales climbed 13.1 percent year-on-year in February as the sector rebounded from a slump in 2011.
Mukherjee is to present the budget on Friday in which he is expected to set a growth target of 7.5 percent-eight percent for the next year to March 2013.
The president, presenting the government's legislative blueprint for the session, said the government hoped to bring in a long-awaited Goods and Services Tax to harmonise levies across India and ease the movement of goods.
The tax is one of the government's most important proposed reforms but must be approved by two-thirds of parliament and half of India's states to become law, meaning the coalition will have to rely on opponents to see it passed.
The president also said a contentious land acquisition act will be introduced, seen as key to opening the door to infrastructure spending.
But she avoided mention of other controversial reforms such as opening the retail market to full-scale global competition and stressed the left-leaning government's commitment to providing "livelihood security."
The government made little headway in enacting key reforms in the last stormy sitting of parliament and is expected to make scant progress in this session after its drubbing in recent state polls and a run of graft scandals.
Analysts said the strong industrial output data would give India's central bank leeway at a policy meeting set for Thursday to assess the budget's inflationary impact before starting to roll back interest rates.