India's Industrial Output Posts Double-digit Growth

April 12, 2010
Many factories, such as those of India's largest carmaker Maruti Suzuki, are running at full capacity as increasingly affluent consumers open their wallets.

India posted double-digit industrial growth for a sixth straight month in February, data showed on April 12.

Output by factories, mines and utilities grew 15.1% year-on-year in February, according to the government figures, lifted by fiscal stimulus, cheap borrowing costs, resurgent consumer consumption and growing export demand.

Indian consumer goods output, particularly hit by the global crisis, was a key driver of industrial growth in February, expanding 29.9%. Production of capital goods, such as machinery, rose 44.4%.

Many factories, such as those of India's largest carmaker Maruti Suzuki, are running at full capacity as increasingly affluent consumers open their wallets.

"There is an overall improvement in consumer and industrial demand," said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry.

The rise in the Index of Industrial Production was below the 16.7% logged in January and slightly weaker than analysts' expectations but economists said it was a healthy performance. The numbers will "likely reassure policymakers that they can remove stimulus without disrupting the economys growth," said economist Nikhilesh Bhattacharyya at Moody's Economy.com.

The focus of India's central bank has switched from nurturing a recovery in Asia's third-largest economy to worrying about prices, with inflation expected to breach 10% in official figures due later this week.

India's central bank is widely expected to boost interest rates for a second time since March when policymakers meet next week with inflation, driven by spiraling food prices, spilling over into the wider economy.

Even with some economic indicators pointing to a slowing from peak levels of earlier months, analysts say India's recovery appears firm enough to unwind stimulus put in place to shield the economy from the downturn. India's economy should expand by up to 8.75% this financial year to March 2011 and return to pre-financial crisis growth levels of 9% next year, according to the government.

The South Asian nation's strong growth in the face of anaemic expansion in developed nations has pushed up Indian shares and swept the rupee to 19-month highs against the dollar as investors have poured money into India.

"There is an overall improvement in consumer and industrial demand," said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry.

Copyright Agence France-Presse, 2010

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