Industry surges 16.8% in Dec, rekindles stimulus debate

Industrial growth zoomed to 16.8 per cent in December 2009, giving hope to the government that overall economic growth may be faster and rekindling a debate on withdrawal of stimulus packages in the Union Budget.

The Index of Industrial Production (IIP), which measures industrial growth, had contracted by 0.2 per cent in the same month a year ago and hence made the industrial recovery look comparatively higher.

The growth in the factory output was mainly led by the manufacturing sector, which constitutes around 80 per cent of IIP, as it rose by 18.5 per cent against 0.6 per cent slide a year earlier.

Within manufacturing, the consumer durables industry like auto, refrigerators, etc surged 46 per cent against 4.2 per cent fall in December 2008.

Capital goods output also rose by 38.8 per cent, clearly showing that industry would sustain high growth rate in future as well.

This has raised the expectations of the Government that is now talking of better economic growth numbers than 7.2 projected by the Central Statistical Organisation earlier this week.

"It (IIP growth rate in December) is quite encouraging and I do hope that third quarter GDP figures will also be encouraging... It will get reflected in the overall GDP", Finance Minister Pranab Mukherjee reporters here.

However, the strong IIP numbers have sharply divided analysts and chambers whether stimulus provided to spur the industry facing the brunt of global financial crisis should now go.