Industrial production in August grew by 10.4 per cent from a year earlier, the highest in the past 22 months, on the back of robust demand for consumer goods, giving a much-needed thrust to the economy in the on-going festival season.

Economists and analysts said the August performance, especially the healthy double-digit growth in manufacturing output, was a sure sign that the economy had rebounded. The index of industrial production (IIP) data released on Monday also buoyed stock market sentiments and the BSE benchmark Sensex notched a gain of 384 points.

Factory output growth in July was also revised upwards to 7.2 per cent from the initial estimate of 6.8 per cent. During April-August in the present year, industrial production recorded a growth of 5.8 per cent, against 4.8 per cent posted in the same period previous year.

Even as the growth has been positive consecutively for the past five months, economists expect some moderation from the level of growth in August. But growth would continue to be strong.

“The pace of expansion will not be sustained but it is definitely on the recovery side. This will boost sentiments and positive growth is here to stay. We are going to see some moderation here on,” principal economist at Credit Rating Information Service of India (Crisil), D K Joshi, said.

The worst is over, prime minister Manmohan Singh had said in Mumbai on Sunday, referring to the recovery he saw from last year’s economic slowdown. Finance minister Pranab Mukherjee on Monday said the strong industrial growth was a “good sign of recovery” and the deputy chairman of the planning commission, Montek Singh Ahluwalia, called it a “good Diwali gift”.

Finance secretary Ashok Chawla said the positive numbers were here to stay and would only get better in the coming months.

Consumer goods drove industrial growth in August. Consumer durables like refrigerators, washing machines and TV sets posted a hefty growth of 22.3 per cent during the month, against a meagre 3.9 per cent growth in the same month last year.

“The festival season will definitely contribute to industrial production growth. The consumer durables business has been growing in the past 10 months. There is a positive trend now,” deputy managing director of Samsung India, R Zutshi, said.

Maruti Suzuki India chairman R C Bhargava said, “At least in the next couple of months the trend is poised to be positive riding on the festival season as well as the wedding season. It is very difficult to predict whether industry can sustain these numbers from there on; we will have to see when we get into 2010.”

Mining rose by 12.9 per cent against just 2.8 per cent in August 2008 and manufacturing soared 10.2 per cent (1.7 per cent) due to rise in demand owing to a pick-up in retail demand for goods. Electricity output recorded an impressive growth of 10.6 per cent (0.8 per cent).

Capital goods -- such as textile machinery, telecom cables, tractors -- and consumer goods also registered impressive growth of 8.3 per cent (0.9 per cent) and 8.5 per cent (6.4 per cent), respectively. Intermediate goods such as cotton yarn and polyester yarn grew by 14.3 per cent, from a decline of 5.5 per cent in August last year.

“The stock market went up because of a lot short covering today and the IIP numbers added fuel to the fire. Earlier, there were only a few components that were dictating these numbers; now this is broadbased. Overall, the market will trade at a broad range of 15,200 to 17,600 points and a slight moderation in prices is likely,” said Pankaj Pandey, research head at ICICI Securities.

“Industrial growth has hit a peak with the August numbers. The growth is likely to remain robust for the rest of the year, but we will not see a double-digit growth again,” said Atsi Sheth, chief economist at Reliance Equities.

(With inputs from Jayashree Maji, Prashant Mukherjee and Saahil Anant)