Thursday June 12, 02:00 PM
India's April industrial output up 7.0 pct y/y |
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By Surojit Gupta
NEW DELHI (Reuters) - India's industrial output rose 7.0 percent in April from a year earlier, rebounding from the previous month with a resilience which economists said gave the central bank room to tighten policy further.
Industrial production outstripped a forecast for annual growth of 5.7 percent in a Reuters poll, and jumped from an upwardly revised 3.9 percent in March.
The data comes a day after the Reserve Bank of India (RBI) unexpectedly raised its key lending rate for the first time in more than a year, taking it up 25 basis points to a 5-½ year high of 8.0 percent to contain inflation expectations.
The central bank, battling annual inflation that is above 8 percent and rising, has reined in cash in the banking system to curb inflation rather than raising rates in the past year in an effort not to slow economic growth too aggressively.
But analysts said Thursday's data suggested it had room to act again if inflation headed to double digits. "This is all the more the reason for RBI to keep watching and clamp down on liquidity," Manju Ghodke, economist at construction and engineering firm Larsen & Toubro in Mumbai.
"I see this as another signal that the economy is continuing to do well. RBI will then willingly sacrifice growth to curb inflation."
Monetary policy and a strong rupee last year clipped demand, and industrial output growth has fallen from double-digit rates early in 2007.
But the rupee has declined 8 percent against the dollar since the start of 2008 and Thursday's data showed manufacturing production rose an annual 7.5 percent in April, compared with an upwardly revised 3.9 percent in March.
The markets took the figures in their stride.
The partially convertible rupee held steady at 40.80/81 per dollar from before the data.
The 10-year government bond yield was also steady at 8.35 percent after touching a one-year high of 8.39 percent in early trade following the rate decision.
Industrial output rose 8.1 percent in 2007/08 (April-March) compared with 11.6 percent in 2006/07.
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