India's April industrial output up 9.5 per cent


MP Guru

New Delhi: India's industrial output in April rose 9.5 per cent from the same month a year earlier as consumers spent more on cars and televisions, raising the chances of a further rise in interest rates in July, analysts said.

The pace of growth outstripped analysts' expectations for an annual rate of 7.9 per cent in April. Industrial output expansion for March was revised up to 8.2 per cent from a previous reading of 7.7 per cent.

Manufacturing, which makes up more than three quarters of industrial production, increased 10.4 per cent in April from a year earlier, compared with March's 8.9 per cent growth, and a 9.5 per cent rise in February.

"These are good numbers," said Saumitra Chaudhuri, economic adviser at credit rating agency ICRA. "A rate increase in July is most likely."

The Reserve Bank of India (RBI), in a rare move between scheduled reviews, raised interest rates by 25 basis points last Thursday, taking its key short-term rate to 5.75 per cent -- its highest in four years -- to curb accelerating inflation.

The move took markets by surprise. Many analysts had expected the central bank to put rates up at its next scheduled review on July 25 after the government raised fuel prices last week, triggering concerns that inflation could soon top 5 per cent.

After the rate rise, many analysts said they still saw another quarter point increase in July.

Weather department officials expect normal monsoon rains this year will bolster crop output, boosting rural incomes and helping industrial output to maintain a strong trend.

More than 600 million Indians live off the land, which means consumer demand is driven by rural incomes, and prospects are bright for farming expansion in the year ending March 2007.

Capital goods output, a barometer of industrial activity, was up 24.9 percent in April, while output of consumer goods, including vehicles and televisions, rose 8.7 per cent.

The government estimates Asia's third-largest economy expanded by 8.4 percent in the fiscal year that ended on March 31. June 13, 2006