India Factory Output Up 10.8%

Output of capital goods such as construction equipment and factory machinery soared 22%.

India looked set for fresh rate hikes, analysts said on Dec. 10, after industrial output rebounded to double-digit growth in October, spurred by manufacturing as demand leaped in the festival season.

Output from factories, mines and utilities jumped 10.8% in October from a year earlier, according to the statistics office, more than doubling a 4.4% increase in September.

India's manufacturing output, which has an 80 % weighting in the industrial production index, climbed 11.3% from a year earlier compared with a 4.6% rise in September.

Output of capital goods such as construction equipment and factory machinery soared 22%. Electricity output climbed 8.8%.

Still, India's industrial output growth lags China, which posted a 13.1% year-on-year increase in October.

The figures, which beat market expectations of an 8.5% rise, were welcome news for the government, battling political fallout from a telecom scandal estimated to have cost the treasury $40 billion.
"This is quite encouraging. I hope this trend will continue and double-digit growth in industry will be possible," Finance Minister Pranab Mukherjee said.

For the first seven months of the financial year to October, industrial output expanded 10.3%, buttressing government projections that economic growth for the fiscal year to March 31 could cross nine percent.

India, the fastest-expanding major economy after China, registered growth of 8.9% year-on-year in the July-September quarter.

The healthy numbers came despite the unwinding of massive fiscal and monetary stimulus put in place in the aftermath of the global financial crisis. Analysts said the data paved the way for more interest rates hikes as authorities struggle to control inflation in the mainly domestically-driven economy of 1.2 billion people.

India's central bank has raised interest rates six times since the start of 2010 to tame inflation which has slowed from double digits but which at 8.6% is still far above its target of four to 4.5%.

Copyright Agence France-Presse, 2010

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