In a reversal from the negative trend witnessed in October raising fears of a slowdown, industrial production bounced back with a growth of 5.9 per cent in November, 2011, marking a five-month high and just a tad lower than the 6.4 per cent expansion posted in the same month a year ago.

Even as the stock markets ignored the positive IIP (index of industrial production) numbers and India Inc. remained cautious, the government hinted at its intent on taking ‘proactive' steps and adjustment in policies to sustain the growth momentum.

“If this trend in the numbers continues, perhaps we can expect to have a better performance (during December-March)...We need to build on this recovery with a stronger performance [in capital goods] in the remaining months of the current financial year. The focus will have to be accordingly adjusted. But for that, we need to take some proactive actions about which I cannot comment on right now,” Finance Minister Pranab Mukherjee said

Sops in the offing

Evidently, Mr. Mukherjee's statement is indicative of certain sops in the offing for corporate investment, the lack of which is clear from the lag in the capital goods sector. However, with Assembly elections round the corner and the moral code of conduct in place, these incentives can only be articulated in the Budget for 2012-13.

As per the IIP data, growth in the manufacturing sector, constituting over 75 per cent of the index, went up by 6.6 per cent in November as compared to of 6.5 per cent in the same month of 2010.

Electricity also saw a robust growth of 14.6 per cent during the month as compared to 4.6 per cent a year ago. Production of consumer goods witnessed a healthy 13.1 per cent increase as compared to a mere 0.7 per cent growth in November 2010.

Commenting on the industrial performance, Prime Minister's Economic Advisory Council Chairman C. Rangarajan said: “I think the industrial production will pick up in the second half of the year... The indications as thrown up by the data for November may continue into the rest of the months of the current fiscal.''

The November data appear particularly heartening as it has come after months of sluggishness. IIP growth was at 3.66 per cent in July, at 3.4 per cent in August and 2 per cent in September and then slumped by 4.74 per cent in October.

With this, the IIP growth during the April-November period this fiscal stands at 3.8 per cent as compared to 8.4 per cent in the same period of 2010-11.

Corporates cautious

Airing positive sentiments, Planning Commission Deputy Chairman Montek Singh Ahluwalia said: “Clearly, the industrial growth of almost 6 per cent is a good change ... I think it hopefully indicates that slowdown in industry will basically come to an end during the third quarter (October to December) of the financial year.”

India Inc., however, views the situation with caution as the performance of critical sectors such as capital goods still remains poor.

“The rebound in industrial growth as per November IIP figures need to be seen with caution as some of the fundamental trends remain weak,” FICCI President Harsh Mariwala said in a statement.

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