New Delhi, Oct. 12: The country’s industrial output grew at its fastest in 22 months in August on the back of a huge surge in the demand for cars, televisions and other consumer durables.
Industrial output rose 10.4 per cent in August against 1.3 per cent a year earlier as sales of durables in the pre-festival month rose 22.3 per cent. “We are in the process of recovery. we hope for some good numbers ahead,” said finance minister Pranab Mukherjee.
“This is a good Diwali gift,” agreed plan panel deputy chairman Montek Singh Ahluwalia. The faster industrial growth figure, however, means that the Reserve Bank of India in its monetary policy review on October 27 will concentrate on scotching a rise in food inflation rather than look to reduce interest rates to boost growth.
Manufacturing grew 10.2 per cent in August from a year earlier, while mining output was up 12.9 per cent and power generation, 10.6 per cent.
Finance secretary Ashok Chawla said he expected the growth surge to continue in September.
Economists with the plan panel pointed out that the key to the recovery of the economy lay in the sharp increase in manufacturing, which has an 80 per cent weight in the index of industrial production. In July, manufacturing grew 7.4 per cent.
“Every month manufacturing data shows clear signs of recovery ... yes the festival months do see firms selling more cars, TV sets and refrigerators. But we believe this is not a blip, but rather part of a trend,” officials said.
The collapse of the global financial system had plunged the West into recession last year that took a heavy toll on Indian exports.
In October last year, exports fell 12 per cent and in March, they shrank almost a third.
The plight of the exporters coupled with recession shook consumer confidence, leading to a fall in demand and spelling bleak days for Indian manufacturers. Car sales contracted nearly 20 per cent in December 2008. Manufacturing, which grew 10 per cent for months, faltered in October-December 2009.
A series of economic stimulus measures, involving a total tax giveaway of Rs 40,000 crore by the government, helped to revive the economy.
Chandrajit Banerjee, director-general of the CII, said, “The 10 per cent plus growth in manufacturing, basic goods, mining and electricity has been buoyed by the government’s stimulus packages.”
Industry chambers, however, warned that for the recovery to remain, it was important to continue with the tax giveaways.
Officials said that the tax sops might stay for the rest of the financial year, though the stimulus had already done its work.
“Advance taxes paid by India’s companies more than doubled in the three month period ended September 15 compared with the first three months of this fiscal. These tax figures clearly indicate that the economy is back on a growth trajectory,” they said.
Corporate taxes paid in the second quarter were a strong Rs 44,010 crore compared with Rs 20,720 crore in the previous quarter.
Source : The Telegraph