IIP growth at 16.7%,FM says economy on fast recovery path

This is the fourth consecutive month the IIP grew at double-digit rates. The index grew at 17.6 per cent in December. Mukherjee said: For the two consecutive months,there has been high growth. Perhaps,it indicates that the manufacturing sector is going to make substantial contribution to growth.

Analysts expect growth to taper off from May onwards as low base effect of the last year disappears and higher interest rates are likely to kick in from April,when the Reserve Bank of India reviews its monetary policy. HSBC expects RBI to hike policy rates by 200 basis points in a gradual manner over the next 12-15 months.

The industrial expansion in January,a month before the government partially rolled back fiscal stimulus,came due to a 17.9 per cent growth in the manufacturing sector,which has 80 per cent weight on the IIP. Within manufacturing,capital goods surged the most. The consumer durables segment zoomed 31.6 per cent in January against 2.1 per cent a year ago. Electricity generation expanded at 5.6 per cent,up from 1.8 per cent.

As a conservative person I would like to wait for one more month figure. But the signal is quite clear and it is encouraging,Mukherjee said.

IIP contributes more than a quarter to the gross domestic product,which grew at 6 per cent in the third quarter. The economy can grow above 8.5 per cent in the fourth quarter,said Kaushik Basu,chief economic adviser in the finance ministry. This would help India attain a target growth of 7.2 per cent in 2009-10.

The BSE Sensex ended down 0.01 per cent at 17,166.62 points on Friday,while yield on the 10-year benchmark government bond ended up two basis points at 8.01 per cent on Friday.