Strong industry data adds to stimulus debate

By Rajkumar Ray and Manoj Kumar

NEW DELHI (Reuters) - Industrial output grew a faster-than-expected 9.1 percent in September from a year earlier, helped by stimulus measures and adding to the debate over when the government should pull back from its aggressive policies to drive growth.

The increase in industrial output topped expectations in a Reuters poll, and August's annual growth was revised up to 11 percent from 10.4 percent, data showed on Thursday.

"It's extremely strong. Month-on-month it has grown about 17 percent annualised after seasonal adjustments. If this pick-up is not because of consumption then it won't sustain," said Ramya Suryanarayanan, economist at DBS in Singapore.

"The rise is mainly on account of pent-up demand," she said, expecting the rate of industrial output growth would moderate in October and November.

Yields on the 10-year bond rose 2 basis points following the data release.

Consumer durable goods output surged by an annual 22.2 percent as stimulus measures, festivals and wage back-pay to government staff boosted demand.

Manufacturing production in Asia's third-largest economy rose 9.3 percent in September from a year earlier, while mining output was up 8.6 percent and power generation rose 7.9 percent.

"It is much above expectations, even if you adjust for the positives ahead of Diwali in October. It is reiterating the fact that the policy environment continues to support industrial growth," Jyotinder Kaur, economist at HDFC Bank in New Delhi.