World Business

Indian industry output up 17.6%

By Kartik Goyal (China Daily)
Updated: 2010-06-12 11:02

NEW DELHI - India's industrial production grew 17.6 percent in April, more than economists predicted, strengthening the case for an interest-rate increase even as Europe's debt woes threaten the global economy.

Output at factories, utilities and mines rose after gaining a revised 13.9 percent in March from a year earlier, the statistics department said in a statement in New Delhi. The April increase was faster than the 14.3 percent median forecast of 24 economists in a Bloomberg News survey.

The announcement affirms Asia has so far been untouched by the crisis emanating from Greece, with data from China's exports to job growth in South Korea and Australia beating analysts' estimates. The Reserve Bank of India has said it plans to counter inflation by raising rates at a "moderate" pace on risks posed by Europe.

"Demand-side pressures are building up and that may fan inflation," said Jay Shankar, Mumbai-based chief economist at Religare Capital Markets Ltd. "Monday's inflation number will be on RBI's radar and that will hold the key to interest rate settings."

India's commerce ministry is scheduled to unveil the inflation data at noon on June 14. The benchmark wholesale-price inflation rate may remain unchanged at 9.6 percent in May, the median estimate of 20 economists in a Bloomberg survey showed.

The yield on the benchmark 10-year bond rose one basis point to 7.56 percent from before the factory output report.

The Sensitive Index advanced 1 percent to 17,084.98 at 12:30 pm on the Bombay Stock Exchange, while the rupee was little changed at 46.80 against the dollar.

Manufacturing output climbed 19.4 percent in April, electricity production 6 percent and mining 11.4 percent, Friday's report showed.

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The Reserve Bank, which has increased rates twice since mid-March by a quarter percentage point each time, said it will tighten the monetary policy at a "cautious" pace as Europe's debt crisis surfaced. The benchmark reverse repurchase rate is 3.75 percent.

"More aggressive actions in our view will run the risk of needing either a stop-go kind of approach or in the worst case, a reversal, which is something we want to avoid," central bank Deputy Governor Subir Gokarn said on June 7.

The World Bank on Thursday said that some European countries may experience a second economic slowdown if the region fails to manage its debt crisis, threatening nations from Central Asia to Latin America.

Finance Minister Pranab Mukherjee said on June 4 that India's $1.2 trillion economy, Asia's biggest after Japan and China, may be hurt in the event of a debt contagion in Europe.

The European Union is India's biggest overseas market, accounting for a fifth of the nation's merchandise exports.

Bloomberg News