India’s industrial output surges

NEW DELHI - India’s industrial production in July grew at its fastest annual pace in a decade, which analysts said could prompt the central bank to again raise interest rates over inflation concerns. Boosted by healthy consumer spending on items such as cars and televisions, industrial output rose a higher-than-expected 12.4% from a year earlier as factories churned out goods to meet rising demand, data released today showed. Annual growth in India’s industrial production was last at these levels in May 1996, Reuters data shows. The annual rise exceeded the median forecast in a Reuters survey for growth of 9.9%. Industrial output has been strong for several months with growth rates of a revised 9% in June, and 11.1% in May. "Overall, industrial data buttress our view that there are enough domestic reasons for the Reserve Bank of India to continue tightening, Fed pause nothwithstanding," said A. Prasanna, an analyst at ICICI Securities in Mumbai. But Finance Minister Palaniappan Chidambaram said he saw the numbers exerting no upward pressure on interest rates. The central bank raised its benchmark short-term interest rate by 25 basis points to 6% on July 25, its second increase in six weeks, as it stepped up its fight against mounting price pressures in the fast-growing economy. Federal bond yields rose after the data was released with the yield on the benchmark 10-year bond pushing up to 7.79% from 7.77% beforehand. Some analysts said July’s strong momentum was partly due to last year’s low annual growth base of 4.7%. Output growth slowed in July 2005 due to floods in western states, the country’s most-heavily industrialised region, and a fire at a key offshore oil rig.