Industrial growth plunged to an 18-month low of 2.7 per cent in November, 2010 from over 11 per cent recorded in the previous month, which may make a strong case for continuation of stimulus in the Budget.
The sharp deceleration in November figures was because of just 2.3 per cent growth in manufacturing, which constitute around 80 per cent in the Index of Industrial Production (IIP) that measures the expansion in factory production.
The part of decline in industrial growth could be due to high base effect of 11.3 per cent in November, 2009, but Finance Minister Pranab Mukherjee refused to take cover behind this statistical technicality.
"Last time, if you have noticed that in November last year it (IIP) was very high, so base effect is also there, but that is no consolation," he said.
However, the Reserve Bank is likely to up policy rates as inflation has assumed bigger concern, analysts said, even though industrialists cautioned the central bank from taking such a step.
The Finance Minister promised corrective action to push up industrial growth. "We shall have to look into and take corrective measures so that IIP numbers revive in the remaining four months," he said.
On Wednesday, industrialists met the Finance Minister for pre-budget interactions and pitched for retaining stimulus. They exuded confidence later that Mukherjee may agree to their demands.
Yes Bank chief economist Shubhada Rao said, "I think stimulus will continue."
Mining output registered a growth of 6 per cent in November, against 10.7 per cent recorded last year. However, Electricity generation rose by 4.6 per cent from 1.8 per cent.
Within manufacturing, consumer non-durable goods production contracted by 6 per cent in November, 2010, while consumer durables rose by just 4.3 per cent against a whopping 36.3 per cent in November, 2009.
Capital goods, which is required for future expansion of industry, expanded by 12.6 per cent in November, over 11 per cent a year ago.
With this, industrial growth stood at 9.5 per cent during the first eight months of this fiscal, against 7.4 per cent a year ago.
As many as nine out of 17 industry groups registered a negative growth in November, 2010.
Economists expect RBI to nonetheless up policy rates at its January 25 quarterly policy review to fight inflation.
"Inflation is a concern. We expect RBI to go for monetary tightening. RBI does not go by month-to-month data," Crisil chief economist DK Joshi said.
In fact, the plan panel also does not seem to be perturbed by sharp dip in industrial growth in November.
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