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Surge in industrial output

Special Correspondent

NEW DELHI: In yet another surprisingly better-than-expected show, as in the case of the 7.9 per cent GDP (gross domestic product) growth in the second quarter this fiscal, industrial growth soared to 16.8 per cent in December 2009 as against a contraction of 0.2 per cent in the same month a year earlier.

Even though the healthy IIP (index of industrial production) figures released by the Central Statistical Organisation (CSO) here on Friday derived advantage from the low base effect, the mere robustness of the growth numbers may be interpreted as a further acceleration in economic recovery and spark a fresh debate on the timing of withdrawal of the fiscal stimulus packages.

Manufacturing drives

According to the IIP data, the surge in overall industrial growth was mainly driven by the manufacturing sector with an output increase of 18.5 per cent during the month as compared to a slippage of 0.6 per cent witnessed in December 2008.

Within the manufacturing sector which accounts for nearly 80 per cent of factory output, it was the consumer durables industry segment of autos, refrigerators and other white goods makers that posted a robust growth of 46 per cent in December 2009 as against a contraction of 4.2 per cent in the like month in 2008.

What is more, even the capital goods industry segment, which caters to the equipment needs of other manufacturers, also posted a production increase of 38.8 per cent to indicate a sustained high growth momentum during 2010 as well. The intermediate goods segment also recorded a growth of 21.7 per cent against a contraction of 8.9 per cent in December 2008. Apart from manufacturing, mining output was also 9.5 per cent higher in December 2009 as against just 2.2 per cent a year ago while electricity generation rose by 5.4 per cent as compared to 1.6 per cent.

Thus, for the first nine months of this fiscal, industry witnessed a growth of 8.6 per cent as compared to just 3.6 per cent in the same period a year ago.

Not surprising then that the government is hoping for a higher GDP growth than the 7.2 per cent projected by the CSO in its advance estimates for the entire fiscal year. Commenting on the IIP data for December, a confident Finance Minister Pranab Mukherjee said: “It [industrial growth] is quite encouraging and I do hope that [the] third quarter GDP figures will also be encouraging...it will get reflected in the overall GDP [for 2009-10].”

On expected lines

Echoing similar sentiment, Planning Commission Deputy Chairman Montek Singh Ahluwalia, however, was more specific on overall GDP growth and industrial performance. “I hope that we are well positioned for next year, that is, fiscal year 2010-11, to have a GDP growth of over eight per cent…We thought it [industrial growth in December] might be 13 per cent. It is now just under 17 per cent. So the performance is very much in the direction that we expected of a good revival,” he said.

Alongside, Dr. Ahluwalia noted that the high industrial growth was on a low base and would stabilise in the coming months.

While hailing the healthy growth numbers, India Inc., however, was circumspect and cautioned against any early withdrawal of the stimulus measures.

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