While on the one hand this impressive industrial growth rate has rekindled hope that the recovery appears to be on firm footing, on the other, it has further intensified debate on whether the ongoing stimulus packages provided by the government to spur economic growth should continue or not.
This robust growth is primarily due to impressive performance in the crucial manufactured goods, particularly consumer goods. However, it must be taken into account that the double digit growth rate in the industrial production measured by the Index of Industrial Production (IIP) is due to a low base of last year as factory production expanded by mere 2.5 per cent in November 2008.
At the same time, analysts say this impressive expansion in the industrial production is mostly attributable to revival in demand cycle due to positive impact of series of stimulus packages unveiled by the government last year to boost industrial growth, which was impacted by the phenomenon of global slowdown. As the IIP data released here show the key manufacturing sector gained maximum out of stimulus packages as it grew by 12.7 per cent in November last year.
The Minister for Commerce and Industry Anand Sharma while terming the surge in industrial growth as “a visible sign of recovery in the industry,” said “this spectacular growth rate will be sustainable in coming months.” “What is spectacular is that there is 37.3 per cent expansion in consumer durable goods (like auto, refrigerators and televisions) as against 0.3 per cent in same month in 2008,” he said. Cumulatively the industrial growth rate in the fist eight months of the current fiscal (April to November, 2009) grew by 7.6 per cent compared to 4.1 per cent in the same period of the previous fiscal. As the data show the mining production expanded by 10 per cent in November 2009. On the other hand the electricity generation, which plays the key role in boost industrial production, grew by just 3.3 per cent. Interestingly, in contrast to consumer durables, production of consumer non-durables grew by just 3.1 per cent in November compared to 12.4 per cent in same month in 2008. Ficci President Harsh Pati Singhania said “though the pattern of growth seen in the sub sectors of industry indicate positive response to stimulus measures, a sudden withdrawal of stimulus will break this growth spell.”