India’s Industrial Output Growth Beats Estimates, Spurring Sensex Advance
Output (INPIINDY) at factories, utilities and mines advanced 6.8 percent from a year earlier, after a revised 2.5 percent climb in December, the Central Statistical Office said in a statement in New Delhi today. The figure exceeded all 26 estimates in a Bloomberg News survey.
A history of swings in the data may prevent the report from easing concern that the cost of credit and the impact of Europe’s debt crisis are dimming India’s economic outlook. The central bank, which lowered lenders’ reserve requirements last week and reviews rates on March 15, has signaled readiness to join nations from Brazil to the Philippines in cutting borrowing costs as expansion slows and inflation eases.
“The production figures are very volatile and I wouldn’t give too much weight to this number,” said Madan Sabnavis, chief economist at Credit Analysis & Research Ltd. in Mumbai. “The overall growth trend still remains weak. The Reserve Bank of India will wait until April to take any action on rates, and by then it will have more information on the budget deficit and inflation.”
The rupee weakened 0.3 percent to 49.9831 per dollar at the 5:00 p.m. close in Mumbai. It has rebounded 6.2 percent so far in 2012 after sliding 16 percent last year, the worst fall in Asia. The BSE India Sensitive Index (SENSEX) rose 0.5 percent. The yield on the 8.79 percent note due November 2021 rose one basis point, or 0.01 percentage point, to 8.3 percent.
A government forecast of 6.9 percent gross domestic product growth in the year through March, the slowest since 2009, policy gridlock and fiscal and trade deficits have fanned concern that the outlook for Asia’s third-largest economy is deteriorating.
Finance Minister Pranab Mukherjee presents the budget for the next fiscal year the day after the Reserve Bank assesses rates. The central bank has signaled that steps to tackle price pressures by paring the budget gap can boost its scope to cut borrowing costs.
India’s gross domestic product rose 6.1 percent last quarter from a year earlier, the slowest pace in more than two years. It climbed 8.4 percent in the last fiscal year.
Inflation held at close to the lowest level in 26 months in February, with the wholesale-price index gaining 6.7 percent from a year earlier, according to a Bloomberg survey.
That would still be the fastest pace in the so-called BRIC group of economies that also includes Brazil, Russia and China. This year’s 17 percent climb in the price of Brent crude oil, the benchmark for almost all of India’s imports, threatens to spur price rises.
Tata Steel Ltd., India’s biggest producer of the alloy, increased prices for the second consecutive month in March as demand for steel climbed on prospects for interest-rate cuts.
Manufacturing gained 8.5 percent in January from a year earlier after a 2.6 percent advance in December, today’s report showed. Electricity output rose 3.2 percent. Mining fell 2.7 percent.
The Reserve Bank reduced the amount of deposits lenders need to set aside as reserves on March 9, to 4.75 percent from 5.5 percent. The bank last reduced the ratio on Jan. 24, by 0.5 percentage point.
Indian officials are under pressure to revive growth, with Prime Minister Manmohan Singh trying to preserve an economic turnaround that began in the 1990s.
Singh’s ruling Congress party was routed in regional elections last week. President Pratibha Devisingh Patil told parliament today that the government remains confident it will soon raise economic growth to 8 percent to 9 percent.
To contact the editor responsible for this story: Shamim Adam in Singapore at email@example.com