NEW DELHI: The debate over whether it's time for the government to start winding up the aggressive stimulus package is expected to get sharper, with industrial output topping market expectations to post 9.1% growth in September from a year earlier, continuing its upward spiral for nine consecutive months. Government data released on Thursday also revised the annual growth figure for August to a 22-month-high of 11% from 10.4%.
Admittedly, part of the rise in industrial growth is due to low base effect as the index of industrial production (IIP) grew by just 1.7% a year ago. However, it is before the financial tornedo hit the global economy in September 2008, whose effect was felt in the later part of the year. But there is no denying that the government's stimulus package has worked well.
FM Pranab Mukherjee oozed optimism. ‘‘We are hoping that when the final figure of the second quarter will be available, perhaps there will be some higher growth. If the higher growth projection is there, then in the third quarter, fourth quarter we can make up,'' he told reporters.
When asked how soon India will bounce back, home minister P Chidambaram said, "We will bounce back soon. We are likely to achieve close to 8% growth next year and then we will get to 9% growth after that. We are part of the global economy. If the world sneezes, we catch a cold."
He added that India couldn't wish away its dependence on oil. "India is still dependent on imports and our economy is dominated by the services sector. These factors bind us to the world," he said.
Planning Commision deputy chairman Montek Singh Ahluwalia described the latest figures as ‘a very good Diwali gift'', underlying the contribution made by festive demand in pushing consumption. What Ahluwalia meant probably was that this demand could not have come but for the government's aggressive economic and fiscal measures that are likely to offset the expected loss in farm output from a poor monsoon.
Indeed, the October Purchasing Managers' Index for India showed the pace of manufacturing activity picked up as domestic demand and factory orders rose. On annualised basis, consumer durable goods output surged by an annual 22.2% as stimulus measures, festivals and salary arrears to government employees pushed demand. But the India growth story still lagged China's 13.9% recorded in September.
On Wednesday, China reported a 19-month-high surge in October factory output at 16.1%. Department of industrial policy and promotion secretary Ajay Shankar felt the economy was firmly back on growth path. ‘‘The recovery is broad-based and sustainable.'' Manufacturing production rose 9.3% in September, while mining output was up 8.6% and power generation 7.9%. The market had initially expected around 7% growth in September industrial output.
With the actual figures topping those expectation squarely, the feeling that despite the poor monsoon and floods the country will still end up with a six-plus GDP growth is getting stronger.
Source : TOI