Lending more credibility to the sustainability of an economic revival, the Index of Industrial Production (IIP) jumped a robust 9.1 per cent in September compared with the same month last year. The unexpectedly large increase, experts said, showed the country’s manufacturing sector rounding back into form, and that three rounds of fiscal stimulus are yielding results.

The sharp growth also raised doubts whether the Reserve Bank of India would tighten its monetary stance further by increasing key interest rates ahead of its next review in January 2010. The government has reiterated it will continue with the fiscal stimulus till the beginning of the next fiscal. But inflationary pressures have started seeping in, forcing the RBI to think of an early exit from the ‘soft’ interest rate regime.

The industrial output index that measures the performance of the mining, manufacturing and electricity sectors, was led by 12 out of 17 industries showing positive growth compared with September 2008. The manufacturing sector that accounts for almost 80 per cent of the industrial output rose 9.3 per cent.

“We were expecting IIP to be a bit lower because the core index had dropped, but this is a clear sign of a pick-up in manufacturing, and capital goods have done well,” Crisil Director and Chief Economist D K Joshi told The Indian Express.

The infrastructure index had grown just 4.1 per cent in September raising some doubts about a sustained recovery. “As long as the stimulus continues, the growth momentum will continue. This is a very strong performance,” he said.

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