NEW DELHI: India's industrial output grew at its fastest year-on-year pace in almost two decades at 16.8% in December, signalling a strong recovery but also sparking apprehensions that the government may take cues from the RBI and start winding down some of the stimulus measures in the Budget.
The manufacturing sector, which constitutes around 80% of industrial output, expanded by 18.5% to set the pace of growth. As a pointer to rising domestic consumption strengthening future growth, consumer durables industries such as automobiles surged 46% and capital goods output rose by 38.8%.
The latest numbers are much higher than a revised annual rise of 11.8% in November as well as forecasts of around 12%. It is the highest year-on-year growth registered in the index of industrial production (IIP) since April 1995, when the new series, which uses 1993-94 as base year, started. Even in the old series of the IIP, with base year 1980-81, March 1990 was the only month that had ever registered a higher growth rate, 23.8%.
Besides manufacturing, mining output grew by 9.5% in December against 2.2% a year ago, while electricity generation rose by 5.4% against 1.6% in the previous corresponding period.
``Quite encouraging,'' is how finance minister Pranab Mukherjee described the latest figures. ``I do hope that third quarter GDP figures will also be encouraging... it will get reflected in the overall GDP.'' The finance minister expects the economy to grow around 7.75% in 2009-10.
C Rangarajan, chairman of the PM's economic advisory council and former RBI governor, said the strong numbers are likely to set off fiscal consolidation with withdrawal of some of the stimulus measures.
This is making industry nervous as the recovery is not yet broad-based. ``Some important sectors like food products, cotton textiles, leather and miscellaneous manufacturing industries are lagging behind in terms of growth. Also, we need to be cautious because this strong (manufacturing) growth has come over the negative growth of 0.6% in December 2008,'' Ficci secretary general Amit Mitra said, cautioning the government against winding down the stimulus measures just yet.
The government's chief statistician Pronab Sen had also pointed to the dangers of depending solely on IIP data in taking a decision on whether the stimulus should be withdrawn, since it gives only the production figures and does not indicate whether demand exists to match that supply or it would only result in inventories piling up.
Source : TOI