Spurred by robust growth in manufacturing, industrial output bounced back to 16-month high of 8.2 per cent in October raising hopes of economic recovery in the coming months.
"I am very encouraged by the indications of the green shoots in economy in terms of production. IIP figures are very encouraging," Finance Minister P Chidambaram told reporters while commenting on surge in Index of Industrial Production (IIP) to 8.2 per cent, as against contraction of 0.7 per cent in September.
The growth in the industrial production in October has been mainly on account of good performance of manufacturing, power sector and higher output of capital as well as consumer goods, suddenly revealing signs of recovery in the economy.
The manufacturing sector, which constitutes over 75 per cent of the index, grew by robust 9.6 per cent in October, as against a contraction of 6 per cent in same month last year.
However, the output of this key sector remained low at 1 per cent in the April-October period of this fiscal as against 3.8 per cent growth in the same period in 2011-12.
The factory output had contracted by 5 per cent in October last year.
The IIP had expanded by 9.5 per cent in June 2011.
Attributing part of the increase in IIP to "strong base effect", CII director general Chandrajit Banerjee said that RBI should start "reducing interest rates in January 2013, since India is currently maintaining the highest interest rate regime anywhere in the world."
Industrial output growth in the April-October period this fiscal, however, was 1.2 per cent, less than 3.6 per cent in the same period in 2011-12.
On the impact of October growth rate on GDP for the fiscal, Chidambaram said, "One swallow doesn't make a summer. There are signs of green shoots. Let us be happy about the moment. But let us see how we go forward in the next four
So far this fiscal, Chidambaram said, IIP had shown positive growth only in May at 2.5 per cent and August at 2.3 per cent.
"Let's see what the next four months bring us. Investments are taking place, capacity is being created and consumption is happening in consumer durables and non-
durables," he added.
According to the Prime Minister's Economic Advisory Council Chairman C Rangarajan, the October IIP number is much higher than what was expected.
He said there was a need for industrial growth of about 8-9 per cent in the second