Is India getting into a new paradigm of growth?

RELATED NEWS IIP to be double-digits for several months: HSBC Factory output growth eases; seen slowing more Jan IIP growth at 16.7% vs 1% (YoY); RBI action inevitable

Finally sterling industrial growth numbers in January at 16.7%, even better the December numbers have been raised from 16.8% to 17.6%. And this fast paced growth was because capital goods grew at a scorching 39% in December and a breathtaking 56.6% in January. So is India getting into a new paradigm of growth?

What experts say?

Atsi Sheth, Economist, Macro-Sutra says, "Consumer goods, particularly, consumer durable goods drive the early part of the recovery and capital goods tend to come in when the cycle is more mature. Now, we are still in the early part of the recovery and yet capital goods are doing spectacularly well. So there is a case to be made that this is telling more of a structural story than a cyclical story, if manufacturing is to expand its base in terms of the GDP (gross domestic product) from about 17-20% to 25-30%, capital goods have to play a very leading role and it appears atleast in December and January that they are playing that role."

Sonal Varma, Nomura Financial Advisories says, "Our key takeaway is the capital goods, 56%, 40% in the past month. People have been extremely worried about the capex side of the recovery not picking up, it entirely being a consumption led recovery, which has been boosted by fiscal stimulus. I think the kind of numbers we are getting from the IIP capital goods front and if you look at a broad set of other indicators like non oil imports and non food credit, everything is pointing to the capacity, expansion side also beginning to pick up."

Sachchidanand Shukla, Enam says, "We may have to revise our IIP and growth numbers in light of the performance of the capital goods and these IIP numbers of 17% for two months in a row. In terms of RBI action, I think it's been made very clear by the RBI Governor that they are not going to look at any action before the policy. What we do factor in is a 25 bps each hike in Repo and Reverse Repo."