India's July industrial output rose 7.1 percent from the same month a year ago, a sharp decline from June's gain of 9.8 percent, official data released Wednesday showed.
For April to July, the first four months of India's financial year, industrial output expanded by 9.6 percent, lower compared to 10.6 percent in the year earlier period. Industrial growth has slowed markedly each month since April when it rose 13.6 percent.
This month Indian Finance Minister P. Chidambaram warned that infrastructure bottlenecks had taken a toll on industrial output, a quarter of gross domestic product, even though first quarter economic growth (April-June) showed a surprise gain of 9.3 percent.
For the year to March 2007, industrial output rose 11.3 percent compared to 8.2 percent the previous year, helping the overall economy expand by a faster-than-expected 9.4 percent. The July industrial output slowdown follows moves by India's central bank to tame inflation by raising benchmark interest rates nine times since late 2004 to put a dent in demand for credit and slow inflation. Analysts said the industrial slowdown could lead the central bank to ease rules on lending, but that a rate cut was unlikely.
"The moderation in the manufacturing growth was expected. It is a welcome change and the result of previous monetary policy tightening," said Rajeev Malik, Asia economist with J.P. Morgan Chase. "We do not expect an immediate softening of rates however," Malik said. The Reserve Bank of India will announce its next quarterly review of monetary policy on October 31.
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