India Industrial Output Grows at Slowest Pace in 13 Months

Manufacturing rose 7.3% in June compared with 8% last year

The output from factories, mines and utilities in Asia's third-largest economy grew 7.1% from a year earlier, compared with a forecast rise of at least 8%. This marks the slowest pace in 13 months, according to official data.

The figures reflected the impact of a higher base effect from a year earlier, when production picked up as India's economy began rebounding from the global financial crisis, economists said.

The 7.1% expansion marked a sharp deceleration from May's revised 11.3% growth.

Manufacturing output, which accounts for 80% of the industrial output index, rose 7.3% in June compared with 8% a year earlier.

Industrial output had been lifted by government spending and aggressive monetary easing to help shield the economy from the global economic crisis.

But now those measures are being unwound as India's economy recovers.

Economists are keeping an eye out for July inflation figures due next week which could affect the pace of the Reserve Bank of India's monetary tightening. With inflation running at 10.55%, the central bank has raised rates four times this year, hoping to check price increases that it said were becoming "generalized."

The government expects India's economy to grow 8.5% in the financial year to March 2011 after expanding 7.4%t last year.

New Delhi warned last week that overly aggressive rate hikes to check inflation could derail economic recovery and promised to do all it could to tame prices. The government has been under relentless fire from opposition claims of its "failure" to protect India's poorest from surging prices.

The central bank's dilemma on rate hikes will be increased by the release of official data on August 12 that showed weekly food inflation rose to 11.40% from 9.53% the previous week.

Copyright Agence France-Presse, 2010

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