From correspondents in Delhi, India, 09:33 PM IST

The second half of the year will remain a challenging time for Indian exporters and manufacturers and the manufacturing sector looks set to make a smaller contribution to economic growth, global rating agency Moody's said Tuesday.

'India's industrial production was up 5.4 percent year by year in June, following an upwardly revised but still modest 4.1 percent increase in the previous month. External weakness remains a threat to India's short term manufacturing outlook', Sherman Chan, an economist with Moody's, said in a statement.

'Continued weakness in the world's largest economy is weighing on business confidence around the globe and demand for Indian products will also soften. Therefore, the second half of the year will remain a challenging time for Indian exporters and manufacturers,' she said.

'The consumer sector is expected to play a lesser role in fuelling industrial production in the coming months, as tight monetary policy will curb credit growth and drag on household consumption,'

'For 2008, the manufacturing sector looks set to make a smaller contribution to GDP growth,' Chan added.

(Staff Writer, © IANS)