Industrial output grows 16.8%, highest since ’95

New Delhi: India’s industrial output grew at its fastest pace in over a decade 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 the factory output, expanded by 18.5% to set the pace of growth. As a pointer to rising domestic consumption strengthening future growth, consumer durables industries, like auto, 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 reading in the index of industrial production since April 1995, when the series, which uses 1993-94 as base year, started. In comes recovery, out goes stimulus?
New Delhi: India’s IIP has shown a remarkable growth in December 2009. Besides manufacturing, mining output grew by 9.5% 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 the 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.
    PM’s Economic Advisory Council chairman and former RBI governor C Rangarajan said the strong numbers are likely to set off fiscal consolidation with thewithdrawal 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.
    Government’s chief statistician Pronab Sen had also pointed to the lacunae in depending only on IIP data for stimulus withdrawal, since it gives only the production figures and does not indicate whether the country has the demand to absorb that supply or only inventories are piling up.