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The industrial divide

November 16, 2009

Abstract: The Index for Industrial Production (IIP) numbers for the first half of 2009-10 suggests that industry overall is on a path of steady, if modest, recovery. However, the industrial growth across sectors has been quite unbalanced. A possible explanation for differential growth rates among individual industry groups has been given, mainly against the background of global recovery.

Growth has been induced in some sectors by the rising demand for energy (stemming from recovery) and in others, by a consumption stimulus caused by the implementation of the Sixth Pay Commission recommendations for the payment of two years’ arrears to government employees. In yet other industry groups, revival of business expansion plans has driven growth. In contrast, stagnation in some sectors is explained by sluggish export demand and rising food prices. Overall, how different industries have been performing, post global financial crisis, has depended on how the economic environment is shaping up.

Keywords: IIP; recovery; policy response; Sixth Pay Commission; stimulus

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