India's Production Grows 2.7%; Most in Eight Months
July 10 (Bloomberg) -- India's industrial production increased at the fastest pace in eight months as record-low interest rates and government stimulus measures helped revive demand and investment.
Output at factories, utilities and mines jumped 2.7 percent in May from a year earlier after a revised 1.2 percent gain in April, the statistics agency said in New Delhi today. That was more than double the 1.3 percent increase expected by economists.
Economies across Asia are starting to show signs of recovery from the worst global recession since the Great Depression, prompting policy makers to stop lowering interest rates. The World Bank last month said India may overtake China next year as the world's fastest-growing major economy.
"Industrial activity in India will gain more traction as the favorable effect of lower bank lending rates and a continuing fiscal boost offsets a still-weak export sector," said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. The rise in output "pretty much destroys the probability of further rate cuts."
China's industrial production rose 8.9 percent in May from a year earlier, after advancing 7.3 percent in April. Japan's output increased 5.9 percent in May from a month earlier, the third monthly gain.
Factory production may increase further in India in the coming months after Finance Minister Pranab Mukherjee in this week's budget boosted government spending on rural jobs and eases the tax burden on companies and consumers.
'Stable' Outlook
The budget is consistent with India's non-investment-grade Ba2 local-currency rating and the nation's rating outlook remains "stable," Moody's Investors Service analyst Aninda Mitra said today.
Bonds pared losses. The yield on the 6.07 percent note maturing in 2014 dropped to 6.37 percent as of 12:50 p.m. in Mumbai, from the day's high of 6.43 percent, according to the central bank's trading system.
"The uncertainties relating to the revival of the global economy remain. We cannot therefore afford to drop our guard," Mukherjee said in his July 6 budget speech in parliament in New Delhi. "We have to continue our efforts to provide further stimulus to the economy."
India's $1.2 trillion economy may expand 7 percent in the year to March 2010, Prime Minister Manmohan Singh said this week, though the nation should aim for growth of between 8 percent and 9 percent in the medium term to create jobs and reduce poverty.
Faster Than China
The World Bank last month said it expects India's economy to grow 8 percent in 2010, compared with a 7.7 percent pace of expansion in China.
India's economy grew 6.7 percent in the year to March 2009, the slowest pace of expansion since 2003. Growth averaged 8.5 percent in the previous five years.
"The budget is putting more money in the hands of consumers," said Sajjan Jindal, managing director of JSW Steel Ltd., India's third-biggest producer of the metal. If implemented properly, the tax cuts will "help companies and revive flagging demand."
Lower borrowing costs are also buoying production growth. The Reserve Bank of India, which last cut interest rates on April 21, next meets to set monetary policy in Mumbai on July 28.
"There are early signs of recovery in some sectors such as automobiles, cement and steel," India's Finance Secretary Ashok Chawla said July 7.
Passenger Cars
India's passenger-car sales rose 7.8 percent in June from a year earlier, the fastest pace in four months, according to figures from the Society of Indian Automobile Manufacturers. Sales of two-wheelers made by Hero Honda Motors Ltd., India's biggest motorcycle maker, climbed 17.4 percent last month. Cement production grew 11.6 percent to 17,180 tons in May from a year earlier.
Consumer-goods production rose 12.4 percent in May from a year earlier, today's report showed. Manufacturing, which accounts for four-fifths of production, climbed 2.5 percent, mining advanced 3.7 percent and electricity gained 3.3 percent, the statement said.
Manufacturing probably continued to strengthen last month, according to the Purchasing Managers' Index compiled by Markit Economics. The gauge stood at 55.3 in June, the third monthly reading above 50, which indicated factory output increased.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net .
July 10 (Bloomberg) -- India's industrial production increased at the fastest pace in eight months as record-low interest rates and government stimulus measures helped revive demand and investment.
Output at factories, utilities and mines jumped 2.7 percent in May from a year earlier after a revised 1.2 percent gain in April, the statistics agency said in New Delhi today. That was more than double the 1.3 percent increase expected by economists.
Economies across Asia are starting to show signs of recovery from the worst global recession since the Great Depression, prompting policy makers to stop lowering interest rates. The World Bank last month said India may overtake China next year as the world's fastest-growing major economy.
"Industrial activity in India will gain more traction as the favorable effect of lower bank lending rates and a continuing fiscal boost offsets a still-weak export sector," said Rajeev Malik, a regional economist at Macquarie Group Ltd. in Singapore. The rise in output "pretty much destroys the probability of further rate cuts."
China's industrial production rose 8.9 percent in May from a year earlier, after advancing 7.3 percent in April. Japan's output increased 5.9 percent in May from a month earlier, the third monthly gain.
Factory production may increase further in India in the coming months after Finance Minister Pranab Mukherjee in this week's budget boosted government spending on rural jobs and eases the tax burden on companies and consumers.
'Stable' Outlook
The budget is consistent with India's non-investment-grade Ba2 local-currency rating and the nation's rating outlook remains "stable," Moody's Investors Service analyst Aninda Mitra said today.
Bonds pared losses. The yield on the 6.07 percent note maturing in 2014 dropped to 6.37 percent as of 12:50 p.m. in Mumbai, from the day's high of 6.43 percent, according to the central bank's trading system.
"The uncertainties relating to the revival of the global economy remain. We cannot therefore afford to drop our guard," Mukherjee said in his July 6 budget speech in parliament in New Delhi. "We have to continue our efforts to provide further stimulus to the economy."
India's $1.2 trillion economy may expand 7 percent in the year to March 2010, Prime Minister Manmohan Singh said this week, though the nation should aim for growth of between 8 percent and 9 percent in the medium term to create jobs and reduce poverty.
Faster Than China
The World Bank last month said it expects India's economy to grow 8 percent in 2010, compared with a 7.7 percent pace of expansion in China.
India's economy grew 6.7 percent in the year to March 2009, the slowest pace of expansion since 2003. Growth averaged 8.5 percent in the previous five years.
"The budget is putting more money in the hands of consumers," said Sajjan Jindal, managing director of JSW Steel Ltd., India's third-biggest producer of the metal. If implemented properly, the tax cuts will "help companies and revive flagging demand."
Lower borrowing costs are also buoying production growth. The Reserve Bank of India, which last cut interest rates on April 21, next meets to set monetary policy in Mumbai on July 28.
"There are early signs of recovery in some sectors such as automobiles, cement and steel," India's Finance Secretary Ashok Chawla said July 7.
Passenger Cars
India's passenger-car sales rose 7.8 percent in June from a year earlier, the fastest pace in four months, according to figures from the Society of Indian Automobile Manufacturers. Sales of two-wheelers made by Hero Honda Motors Ltd., India's biggest motorcycle maker, climbed 17.4 percent last month. Cement production grew 11.6 percent to 17,180 tons in May from a year earlier.
Consumer-goods production rose 12.4 percent in May from a year earlier, today's report showed. Manufacturing, which accounts for four-fifths of production, climbed 2.5 percent, mining advanced 3.7 percent and electricity gained 3.3 percent, the statement said.
Manufacturing probably continued to strengthen last month, according to the Purchasing Managers' Index compiled by Markit Economics. The gauge stood at 55.3 in June, the third monthly reading above 50, which indicated factory output increased.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net .
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