India’s Industrial Production Rises as Singh Seeks RevivalUnni Krishnan
India’s industrial production unexpectedly rose in February after policy changes and interest-rate reductions to revive economic growth from its weakest pace in a decade.
Production at factories, utilities and mines climbed 0.6 percent from a year earlier after a 2.4 percent gain in January, the Central Statistical Office said in a statement in New Delhi today. The median of 30 estimates in a Bloomberg News survey was for a 1.3 percent drop.
Prime Minister Manmohan Singh is trying to boost expansion as he grapples with a record current-account deficit and elevated inflation, which has limited the central bank’s scope to reduce borrowing costs further. Finance Minister Palaniappan Chidambaram embarks on an investor roadshow next week in the U.S. and Canada to lure investors to Asia’s third-largest economy after the steepest drop in foreign direct investment in more than a decade.
“Growth is likely to remain subdued for the first half of the year and then we expect a broad recovery, but it won’t be sharp,” Vishnu Varathan, a Singapore-based economist at Mizuho Corporate Bank Ltd., said before the report. “Neither domestic nor global indicators suggest growth roaring back.”
The rupee strengthened 0.1 percent to 54.46 against the dollar as of 12:26 p.m. in Mumbai, while the BSE India Sensitive Index slumped 1.6 percent. The yield on the 8.15 percent note maturing June 2022 slipped 4 basis points, or 0.04 percentage point, to 7.86 percent.
India’s benchmark wholesale-price inflation accelerated to 6.84 percent in February from a year earlier. While economists surveyed by Bloomberg News predict data due March 15 may show price gains eased last month, Reserve Bank of India Governor Duvvuri Subbarao said last week inflation remains “stubborn and elevated.”
Consumer price inflation in India remains the fastest in the Group of 20 major economies after Argentina, according to data compiled by Bloomberg. A gauge measuring retail costs rose 10.39 percent in March from a year earlier, according to a statement released by the Statistics Ministry today.
Loser in Asia
The current account deficit, the broadest measure of trade, swelled to $32.6 billion in the quarter ended Dec. 31, or 6.7 percent of gross domestic product, stoked by gold and oil imports and subdued exports. The shortfall has weighed on the rupee, which is the biggest loser after the yen in the past year in a basket of 11 most-traded Asian currencies tracked by Bloomberg.
The central bank has cut its policy rate by 50 basis points so far this year to spur growth. Still, carmakers from Maruti Suzuki India Ltd. to Ford Motor Co. reported a 6.7 percent fall in annual sales in the 12-month period ended March, the biggest decline since 2001, according to the Society of Indian Automobile Manufacturers.
The fundamentals of the economy are ‘strong’ and investments will pick up, Arvind Mayaram, secretary in the Department of Economic Affairs, told reporters today.
India’s GDP rose 5 percent in the fiscal year ended March 2013, the slowest pace since 2003, hampered partly by a moderation in investment, the statistics agency estimates. The economy may grow 6.1 percent to 6.7 percent in the year through March 2014, the Finance Ministry predicts.