'Manufacturing Shows Growth, Cautious Approach Needed to Combat Food Inflation'

Improvement in domestic manufacturing output in June quarter was helped by decline in input prices and strong internal demand, a Finance Ministry document released on Thursday noted.

However, at the same time, it cautioned that the recent rise in food inflation indicates that the government and the Reserve Bank of India (RBI) should adopt a guarded approach.

"A rise in the prices of fruits, vegetables and pulses and products owing to weather-related disruptions increased CPI-Food inflation from 3 per cent in May to 4.5 per cent in June, underscoring the need for a guarded approach by RBI and the government," the Finance Ministry's monthly economic review released on Thursday said.

On the positive side, the document said that in terms of growth, the country's domestic fundamentals remain strong and improved fiscal performance as well as continued expansion in manufacturing and services, coupled with vigorous capital expenditure spending by both public and private sectors indicates good support for India's growth in the current fiscal.

However, India needs to be mindful of adverse growth developments, which can obstruct the growth trajectory, it noted.