India Industrial Output Up 3.6 Percent In February

Mon, 04/11/2011 - 5:26am
Erika Kinetz, AP Business Writer
MUMBAI, India (AP) -- India's industrial output grew a slower-than-expected 3.6 percent in February as rising input costs and interest rate hikes begin to cut into growth in Asia's third-largest economy.

A CNBC-TV18 poll had predicted growth of 4.85 percent.

Manufacturing growth, which makes up about 80 percent of India's industrial production index, limped in at 3.5 percent for the month, down from 16.1 percent a year ago.

Overall industrial output, which includes manufacturing, mining and electricity, grew 7.8 percent from April through February, down from 10.0 percent last year.

"What is worrying is that weakness in manufacturing continues," said Brinda Jagirdar, head of research at the State Bank of India. "Overall growth momentum is still there. We will see some slow down in response to policy tightening and rising input costs."

Volatile capital goods production numbers have led to large swings in monthly data. Jagirdar said that overall growth momentum remains intact, however, and there was no reason to panic.

"The Reserve Bank will be encouraged to continue with its calibrated tightening in policy," she said.

That will likely dismay India's business lobby, which has been complaining that the bank's eight rate hikes over the last year are pushing up the cost of capital and hurting output.

The latest manufacturing survey by the Federation of Indian Chambers of Commerce and Industry, a major business lobby, showed falling sentiment, with 60 percent of respondents expecting higher growth this quarter, down from 68 percent to 71 percent in the prior two quarters. FICCI said monetary tightening by the central bank was the "most important factor for moderation in growth."

The benchmark Sensex index slid 0.8 percent, to 19,299.9 points, in midday trading on the Bombay Stock Exchange.

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