NEW DELHI: The government had twin cause for cheer with industrial growth picking up pace to a nine-month high in August and consumer inflation remaining steady in September, exceeding expectations and raising hope the economy is set for a revival after slumping to a three-year low in the June quarter.The index of industrial production (IIP) rose 4.3 per cent in August, reversing a contraction in June and faster than a 0.9 per cent rise in July, according to data released by Central Statistics Office on Thursday. Inflation based on the consumer price index (CPI) was at 3.28 per cent in September, unchanged from August, the statistics office said.The expectation had been for inflation of 3.5 per cent and industrial growth of around 2.5 per cent.The numbers will buoy the government, which has been at the receiving end of a spate of criticism for its economic management after growth fell to 5.7 per cent in the April-June period, triggering a raft of downgrades in FY18 growth estimates by multilateral institutions, the Reserve Bank of India and brokerages.The government had been considering a stimulus programme to help revive growth, something the Economic Advisory Council to the prime minister had weighed against on Wednesday. Experts welcomed the signs of recovery but want to watch the data for a few months before calling a turnaround.“These are early signs that will dispel the gloom that had set in. This seems to signal a turnaround in economic activity,” said Saugata Bhattacharya, chief economist at Axis Bank, while pointing out that primary goods and electricity had contributed in a big way to the recovery.HDFC Bank senior economist Tushar Arora said, “Manufacturing growth is better than expected but it does not mean that we will change our forecast because it was prompted by a favourable base in mining and electricity and GST restocking.”Advance indicators such as car sales and the purchasing managers’ indices for September have also been buoyant, suggesting some strength ahead of the festival season.“Three successive impressive growth rates would indicate a real recovery. Or else, it would be more a case of the restocking impact of the GST (goods and services tax),” said Madan Sabnavis, chief economist at CARE Ratings.The government has maintained that the economy bottomed out in the April-June quarter and that it will revive, a view endorsed by RBI that last week pared gross value added (GVA) growth to 6.7 per cent from 7.3 per cent estimated earlier. It said GVA growth will rise to 7.7 per cent in the March quarter.The IMF had on October 10 cut India’s growth forecast for FY18 to 6.7 per cent from 7.2 per cent estimated earlier, attributing the slowdown to GST, implemented on July 1, and demonetisation.The industrial recovery in August was boosted by electricity (8.3 per cent) and mining (9.4 per cent), while manufacturing grew 3.1 per cent. Capital goods production, an indicator of investment activity, was up 5.4 per cent in August while a 6.9 per cent rise in output of consumer non-durables or fast-moving consumer goods (FMCG) indicated strength in the rural economy. Consumer durables, which has a more urban consumption bias, were up a modest 1.6 per cent in August.The data suggests manufacturing and demand are returning to normal after the disruption caused by the GST rollout, though not as strongly as anticipated.“The key support to IIP growth has come from mining and electricity. This shows that manufacturing is still down and out. Even more disheartening is the growth of consumer durables at just 1.6 per cent in August,” said Sunil Kumar Sinha, principal economist, India Ratings.Thirteen out of the 23 sub-sectors of manufacturing with a weight of 27.0 per cent in the IIP recorded a contraction in August 2017.“In our view, while the impact of post-GST restocking may have started to fade, inventory building prior to the festive season is likely to have bolstered manufacturing growth in the just-concluded month. Nevertheless, given the somewhat unfavourable base effect, we expect the IIP growth to ease in September 2017 relative to print of 5.0 per cent in September 2016,” said Aditi Nayar, principal economist ICRA.September’s consumer inflation of 3.28 per cent matched that of August, which was revised down from 3.36 per cent estimated earlier, as food inflation slowed to 1.25 per cent from 1.52 per cent in the month before and 3.96 per cent in the year ago.However, most independent economists ruled out the possibility of a rate cut in December when the RBI governor-led Monetary Policy Committee (MPC) meets to review key policy rates.“Core inflation… continues to outpace the headline reading, which might reinforce the central bank’s neutral stance. Risks on the fiscal front will also play on the central bank’s hand,” said Radhika Rao, India economist, DBS Bank. The MPC kept rates unchanged at its last meeting earlier this month.The staggered impact on the housing index of the CPI due to the increase in the house rent allowance (HRA) of central government employees is likely to push up housing inflation further over the coming year. A reduction in fuel prices due to lower levies may provide some cushion.“We do retain our CPI inflation target of 4-4.5 per cent by March 2018. A rate cut of 25 bps can be expected in Q4 provided inflation remains below 4 per cent,” said Sabnavis.India Ratings chief economist DK Pant said: “There is no possibility of arate cut as corporates are overleveraged and overcapacities persist.”Nayar of ICRA expects inflation to accelerate. “The pass-through of GST to final prices of various goods and services may not be complete,” she said. “Overall, we expect the CPI inflation to cross 4.0 per cent in the ongoing quarter and exceed 4.5 per cent in March 2018.”