India's industrial production recorded its highest rise in more than a decade indicating that the economy is recovering from the recession.

Factory out in the country rose at a much faster rate than the analyst expectations at 16.8% in December compared with a year earlier. The low base affect from last year is also believed to be the reason behind high growth recorded.

The high growth rate will make government start its withdrawal of stimulus it gave when the financial crisis hit the global economy. Many analysts expect the government to indicate measures for withdrawal in the union budget to be announced at the end of February.

Indian economy as a whole is also recording growth which is higher than expected at 7.9% in the three months to September 2009. Apart from government measures such as cut in direct taxes, the central bank of the country, RBI had pumped $125bn into the Indian economy since September 2008.

The government is now focusing on controlling inflation in the country. RBI raised it cash reserve ratio last month to control the rising prices in the country. It expects the inflation at 8.5% of the financial year.

The reserve bank is expected to raise borrowing rates at its April review. The bank looks concerned about the fiscal consolidation of the government. This concern could influence its monetary policy in future.

Some analysts believe that the higher level of government borrowing from the markets may result in RBI not raising its rates.

The government had announced that it is planning to contain the fiscal deficit in 2010/11 to 5.5 percent of GDP from a projected 6.8 percent for this financial year. A major cut in deficit would require large withdrawal of stimulus.

Union Finance Minister Pranab Mukherjee has expressed confidence on the performance and said that the higher rate of industrial production is a healthy sign from the economy.