India industrial output jumps most in two decades
India's industrial output climbed at its strongest pace in nearly two decades in December, official data showed Friday, as economic recovery picked up steam thanks to hefty stimulus measures. Production by mines, factories and utilities rose 16.8 percent in December from a year earlier, the biggest jump since March 1990, according to HSBC economist Robert Prior-Wandesforde, and eclipsed forecasts of 12 percent. The strong data was expected to boost arguments for the government to start rolling back the stimulus steps that helped shield the economy from the worst of the global downturn in the budget to be presented at the end of the month. The surge is "impressive to say the least" and will strengthen the hand of the fiscal and monetary hawks in the Reserve Bank of India and government, said Prior-Wandesforde. Pressure is growing on both the government and central bank to start unwinding stimulus measures with inflation riding at 7.31 percent, the highest level in 13 months, driven by soaring food prices. Concern is also mounting about India's fiscal deficit, which at 6.8 percent of gross domestic product is at a 16-year high. "I would expect some kind of withdrawal of tax cuts in the budget," said India's HDFC Bank economist Jyotinder Kaur. The data showed manufacturing rose 18.5 percent in December from a year earlier, while consumer durables production, including cars and appliances, soared by 46 percent. The industrial production figure marked a sharp contrast to the same month a year earlier, when output shrank by 0.2 percent, as Asia's third-largest economy was buffeted by the worldwide financial crisis. "Most of the sectors which had demonstrated their resilience and capacity to grow have further improved," Commerce Minister Anand Sharma said. Mining grew by 9.5 percent while electricity generation climbed by 5.4 percent. Although the industrial sector represents just over 20 percent of the economy, the numbers bode well for overall growth, economists and the government said. Government officials say India could log at least eight percent growth in the next financial year starting April 1 as it heads back towards the boom levels of nine percent it enjoyed before the global slump. "We are well positioned for next year -- that is fiscal year 2010-11 -- to have growth of over eight percent," senior government economic planner Montek Singh Ahluwalia said. "The performance is very much in the direction that we expect of a good revival," he said. Earlier in the week, India's Finance Minister Pranab Mukherjee said growth could be around 7.75 percent for the year to March 2010. India's economy expanded by 6.7 percent in the previous financial year. To help India weather the financial crisis, the central bank cut benchmark borrowing costs to record lows while the government pitched in with tax and duty cuts, higher spending and other measures. The Federation of Indian Chambers of Commerce and Industry voiced "satisfaction over the strong growth of industrial production" but repeated calls for caution over unwinding stimulus measures. "The stimulus packages need to be continued for some more months to sustain this industrial growth," said federation secretary-general Amit Mitra
India's industrial output climbed at its strongest pace in nearly two decades in December, official data showed Friday, as economic recovery picked up steam thanks to hefty stimulus measures. Production by mines, factories and utilities rose 16.8 percent in December from a year earlier, the biggest jump since March 1990, according to HSBC economist Robert Prior-Wandesforde, and eclipsed forecasts of 12 percent. The strong data was expected to boost arguments for the government to start rolling back the stimulus steps that helped shield the economy from the worst of the global downturn in the budget to be presented at the end of the month. The surge is "impressive to say the least" and will strengthen the hand of the fiscal and monetary hawks in the Reserve Bank of India and government, said Prior-Wandesforde. Pressure is growing on both the government and central bank to start unwinding stimulus measures with inflation riding at 7.31 percent, the highest level in 13 months, driven by soaring food prices. Concern is also mounting about India's fiscal deficit, which at 6.8 percent of gross domestic product is at a 16-year high. "I would expect some kind of withdrawal of tax cuts in the budget," said India's HDFC Bank economist Jyotinder Kaur. The data showed manufacturing rose 18.5 percent in December from a year earlier, while consumer durables production, including cars and appliances, soared by 46 percent. The industrial production figure marked a sharp contrast to the same month a year earlier, when output shrank by 0.2 percent, as Asia's third-largest economy was buffeted by the worldwide financial crisis. "Most of the sectors which had demonstrated their resilience and capacity to grow have further improved," Commerce Minister Anand Sharma said. Mining grew by 9.5 percent while electricity generation climbed by 5.4 percent. Although the industrial sector represents just over 20 percent of the economy, the numbers bode well for overall growth, economists and the government said. Government officials say India could log at least eight percent growth in the next financial year starting April 1 as it heads back towards the boom levels of nine percent it enjoyed before the global slump. "We are well positioned for next year -- that is fiscal year 2010-11 -- to have growth of over eight percent," senior government economic planner Montek Singh Ahluwalia said. "The performance is very much in the direction that we expect of a good revival," he said. Earlier in the week, India's Finance Minister Pranab Mukherjee said growth could be around 7.75 percent for the year to March 2010. India's economy expanded by 6.7 percent in the previous financial year. To help India weather the financial crisis, the central bank cut benchmark borrowing costs to record lows while the government pitched in with tax and duty cuts, higher spending and other measures. The Federation of Indian Chambers of Commerce and Industry voiced "satisfaction over the strong growth of industrial production" but repeated calls for caution over unwinding stimulus measures. "The stimulus packages need to be continued for some more months to sustain this industrial growth," said federation secretary-general Amit Mitra
