With better-than-expected performance in November, industrial production in the first two months of the third quarter now expanded at more than 10 per cent, as it grew by 10.3 per cent in October.
Showing strong signs of economic recovery, industrial production in November reached 11.7 per cent, touching a two-year high. It also once again put the focus on whether the stimulus provided to spur the economy should continue or not.
Part of the industrial growth, measured by the Index of Industrial Production (IIP), is no doubt due to a low base of last year as factory production expanded by just 2.5 per cent a year ago, but it is mostly attributable to stimulus-driven demand. This is evident from the fact that manufacturing, the main gainer from stimulus, grew by 12.7 per cent, driven by 37.3 per cent expansion in consumer durable goods such as auto, refrigerators and televisions.
As part of the stimulus, the government had cut the excise duty by six percentage points and the service tax by two percentage points, besides stepping up Plan expenditure taking the total value of stimulus to Rs. 1.86 lakh crore.
Cabinet Secretary K.M. Chandrashekhar said, “the stimulus is now part of the overall scheme of things. It is not going to be one day there is stimulus and the next day it goes.”
Industrial growth stood at 3.8 per cent in the first quarter of this fiscal, 9.2 per cent in the second quarter and more than 10 per cent in the first two months of the third quarter. As such, if the trend is maintained in December, industry would expand at a faster pace in the third quarter.
“Industrial growth this year is going to be much better than last year. Whether it will be 11.3 per cent for the next six months that is difficult to say,” Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters here.
In November, mining output grew by 10 per cent. However, electricity generation rose by just 3.3 per cent, which could, in fact, apply brakes to industrial growth in future.
In quite contrast to consumer durables, consumer non-durables production rose by just 3.1 per cent in November against 12.4 per cent a year ago.
Intermediate goods expanded by 19.4 per cent (negative 3.9 per cent), capital goods by 12.2 per cent (0.5 per cent) and basic goods by 6 per cent (2.2 per cent).
In the first eight months of this fiscal, industrial growth stood at 7.6 per cent against 4.1 per cent a year ago. “I would certainly hope the trend of IIP growth to continue. I don’t see any reason why it should not continue. I am sure overall there is increase in demand, there is increase in production,” the Cabinet Secretary said.