Belying market expectations, India's factory production in November expanded by 11.7 per cent, the fastest in 25 months, rekindling a debate on whether stimulus provided to spur the economy should continue.
Part of the industrial growth, measured by the Index of Industrial Production (IIP), is no doubt due to a low base of last year as factory production expanded by just 2.5 per cent a year ago, but it is mostly attributable to stimulus-driven demand.
This is evident from the fact that manufacturing, the main gainer from stimulus, grew by 12.7 per cent, driven by 37.3 per cent expansion in consumer durable goods like auto, refrigerators, televisions etc.
HDFC Bank chief economist Abheek Barua: "As regards stimulus, there could be some withdrawal on the indirect taxes side. This could be required to make up for the fiscal deficit."
Crisil principal economic D K Joshi said the government may start withdrawing stimulus, especially from sectors that are recovering like auto and consumer durables.
As part of stimulus, government had cut excise duty by six per cent and service tax by two per cent, besides stepping up Plan expenditure taking the total value of stimulus to Rs 1,86,000 crore.
However, Cabinet Secretary K M Chandrashekhar said: "Stimulus is now part of the overall scheme of things... It is not going to be one day there is stimulus (and) next day it goes."
