After last fiscal’s double-digit expansion, industrial production picked up more steam to grow by 17.6 per cent in April, boosting the prospects of achieving 8.5 per cent economic growth in 2010-11.
The increase in output was due to a robust showing by the manufacturing sector and a low-base effect, caused by the global economic slowdown.
Manufacturing, which accounts for around 80 per cent of the Index of Industrial Production (IIP), expanded by 19.4 per cent in April, with capital goods growing by 72.8 per cent and consumer durables by 37 per cent.
The April figure is almost equal to the 20-year-high output of 17.7 per cent achieved in December 2009.
Analysts say that the strong uptick in April, coupled with a normal monsoon, would help the economy grow by an estimated 8.5 per cent in 2010-11.
However, the finance minister, Mr Pranab Mukherjee, said he expected the industry to do even better in April. “Of course, my appetite is infinite. I would have been happier if it was 20 per cent,” he told reporters.
While the double-digit growth has strengthened the case for stimulus rollback, the Planning Commission deputy chairman, Mr Montek Singh Ahluwalia, cautioned that withdrawal should not be quickened.
“I don’t think it (stimulus withdrawal) needs to be quickened,” he said.
India Inc also cautioned that the trend may moderate from June onwards since a part of the industrial expansion could be attributed to a low base in April last year. “This trend of very high growth might moderate from June onwards because of the base effect,” Ficci secretary-general, Mr Amit Mitra, said.
In fact, the low base is quite evident as capital goods had contracted by 5.9 per cent in April 2009, even as consumer durables had risen by 17.6 per cent.
Crisil chief economist, Mr D.K. Joshi, said a one-off rise in IIP numbers would not prompt RBI to further tighten money supply, especially when the fear of contagion of debt crisis in eurozone is growing. “One piece of figure will not prompt the RBI to change its stance. We expect them to go on with their moderate monetary stance,” he said. — PTI