India factory growth at 8-10 pct in FY09-PM adviser

NEW DELHI, July 3 (Reuters) - India's factory output is likely to grow 8-10 percent in fiscal year 2008/09, after 8.8 percent last year, despite high interest rates and inflation, an adviser to the prime minister said on Thursday.

V. Krishnamurthy, the chairman of the National Manufacturing Competitiveness Council (NMCC), told Reuters in an interview a shortage of capacity continued in most manufacturing sectors and more investment was needed.

Asked how much manufacturing could grow this year in the face of high interest rates and inflation, he said: "Eight to 10 percent."

"Even if you go by the conservative estimate of 8 percent growth in the economy, as predicted by the Planning Commission, the manufacturing has to grow by 10 percent."

He said inflation would definitely impact manufacturing this year.

Krishnamurthy said the NMCC, set up by the prime minister in 2004, would submit a report to the government within a few weeks on ways to attract more foreign investment and boost factory output.

"We are advocating that this government should have a manufacturing policy and the policy should be brought into place as quickly as possible," he said.

The panel made a number of suggestions before the 2008/09 federal budget, most of which were accepted, including that the government cut duties on a range of manufactured products. (Reporting by Rajkumar Ray, Editing by Mark Williams)