The index of industrial production (IIP) figures released last week point to a continuing growth momentum. During November 2009, the annual IIP growth rate touched 11.7 per cent. The mining and manufacturing sectors grew at 10 per cent and 12.7 per cent respectively. The cumulative growth for the eight months from April to November stands at 7.6 per cent over the previous year. The numbers clearly show that the recovery is broad-based, a point more tellingly corroborated by the performance of specific industries. As many as 14 out of the 17 groups have shown positive growth in November, with “transport equipment and parts” registering a phenomenal 38.3 per cent.
These statistics also find support in anecdotal evidence. For instance, in passenger cars and two- and three-wheelers, India has become a significant player, which is reflected in the high growth recorded under ‘transport equipment.’ The turnaround in exports after a long period of decline should augur well for manufacturing. From a “use-based” standpoint, it is obvious that consumer spending on durables and non-durables is on the rise. With just over a month to go before the union budget, and less than two weeks before the usual review of the monetary policy, attention has turned on a strategy for exiting from the stimulus packages and on the question whether there will be any monetary tightening. The government and the Reserve Bank of India would do well to take the cue from countries that have been cautious about withdrawing the stimulus before the return to a robust growth path is clearly established.
