Industrial output grew by 11.7 per cent in August, the highest in two years, raising prospects of a sustained revival in the broader economy in the coming months.
Manufacturing accounts for 80 per cent of overall industrial output, and grew 12.7 per cent. But the real story lay in the consumer durables sector that grew by a record 37.3 per cent, implying that private consumer demand is reviving growth in the broader industrial horizon.
The data shone out as a beacon of hope for government as it prepares to present the budget for 2010-11 next month.
“The data shows that domestic demand is strong and is becoming visible,” commerce and industry minister Anand Sharma told reporters as he announced a Rs 500 crore incentive package for exporters.
Exports ended a 13-month streak of contraction, growing by 18 per cent in November and followed it up with a 9 per cent growth in December.
“We have to be cautious in our approach. The withdrawal should not be abrupt, as some sectors will still need help,” Sharma said.
All eyes are now on the Reserve Bank of India (RBI) that would announce the monetary policy later this month. Analysts were not sure whether the latest data could pave the way for a higher interest rate.
“We believe there is a high probably that growth in the next couple of years will surprise on the upside rather than downside,” said Rajeev Malik of Macquarie Securities.