Indias Industrial Output Barely Rises

India's Industrial Output Barely Rises as Gloom Mounts

Offering a glimmer of hope, Friday's industrial data showed output of capital goods such as office buildings, machinery and equipment -- a pointer to future activity -- rose 9.5% after shrinking 1.7% in January.

NEW DELHI -- India's industrial production rose just 0.6% in February from a year earlier, data showed Friday, adding to a string of weak economic figures and fuelling hopes of further interest rate cuts.

While the increase in output at factories, mines and utilities in Asia's third-largest economy outpaced analysts' expectations of a 1% decline, it is much slower than the 2.4% rise in January.

Manufacturing, which accounts for three-quarters of India's Index of Industrial Production, grew 2.2% in February from a year earlier.

"Mining activity is contracting and manufacturing is growing only slowly because of weak domestic sales and tepid export demand," Moody's Analytics said.

Soft domestic demand was underscored by figures earlier in the week showing car sales in India's once-booming passenger market suffered their first annual fall in a decade.

Even in the services sector, flagship IT outsourcer Infosys reported weaker-than-expected results on Friday and forecast slow growth for the year ahead, leading to a 20% fall in its share price.

Offering a glimmer of hope, Friday's industrial data showed output of capital goods such as office buildings, machinery and equipment -- a pointer to future activity -- rose 9.5% after shrinking 1.7% in January.

The government forecasts the economy will grow by around 6% in this financial year starting April 1 after expanding at an estimated decade low of 5% last year.

While such growth is enviable by anamic Western standards, it is not enough to create the millions of jobs the country of 1.2 billion needs to generate for its fast-growing young population.

The economy has been hit by high interest rates in the face of stubbornly strong inflation, falling exports and slow investment caused by fears about corruption and disappointment with the government's slow reform program.

Nomura analyst Candy Cheung has projected industrial output growth will remain weak due to relatively soft global demand as well as supply bottlenecks caused by India's dilapidated highways, ports and other infrastructure.

Business has urged the government to accelerate reforms to open the economy wider to foreign investment and speed up infrastructure project clearances. It has also been calling for aggressive cuts to borrowing costs to boost consumption. But stubbornly high inflation makes large rate cuts impossible, the bank has said.

The Consumer Price Index, released separately Friday, showed retail inflation slipped in March after five months of gains but was still in double digits at 10.39%.

-Penny MacRae, AFP

Copyright Agence France-Presse, 2013

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