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India's industrial output grows robustly in March

NEW DELHI — India's industrial production grew faster than expected in March from a year earlier due to strong factory output, but analysts said slowing inflation may allow the central bank to hold interest rates steady for a while.

Industrial output in March rose an annual 12.9 per cent, data showed yesterday, above forecasts for a 10.4 per cent rise, and analysts said that the economy looked set to meet a government estimate of 9.2 per cent growth for the fiscal year 2006/07.

"Even though the industrial output for March is strong, with inflation coming off it will give more flexibility to the central bank to keep interest rates on hold," said Rajeev Malik, economist at JP Morgan in Singapore.

The central bank has raised its main lending rate five times in less than a year to curb inflation and rein in high credit growth. The rate stands at 7.75 per cent and the market has broadly been expecting another increase in the next few months.

Manufacturing production, which represents more than 75 per cent of industrial output, rose 14.1 per cent in March from a year earlier, compared with 12.3 per cent growth in February.

Industrial output in Asia's fourth-largest economy has been growing strongly on the back of robust consumer demand and exports. In February it grew an annual 10.8 per cent.

Interest rate increases are starting to stem consumer spending, but companies' order books continue to build and capital goods spending remains solid.

India releases gross domestic product data for the March quarter and the fiscal year to March 31 at the end of the month.