Indian industrial output grew at its strongest pace this year in October, data showed on Friday, and analysts said they expected growth to gather momentum in the months ahead. Output rose 10.1 percent in October from 12 months earlier, compared with a upwardly revised rise of 8.7 percent in the year through September and rises of 7.9 percent in August and July.
"This is stupendous news and the third leg of industrial expansion is going much faster than we expected," Saumitra Chaudhari, economic adviser with domestic credit rating agency ICRA Ltd, told Reuters.
Industrial output accounts for nearly a quarter of India's gross domestic product, and analysts had been expecting growth to pick up in October as factories prepared for the festive season of Diwali, which signifies the start of the Hindu new year.
Factory output, geared mostly to the domestic market of more than one billion consumers, is a key gauge of domestic demand.
India federal bonds came off the day's peaks after the industrial output data triggered some profit-taking, while the stock market remained cool to the output numbers.
ROBUST MANUFACTURING: Manufacturing output, representing more than 75 percent of industrial output, rose 11.3 percent in the year through October, picking up from 8.0 percent in the year through September, data from the Central Statistical Organisation showed.
Growth in consumer goods, which range from soaps to televisions, was 15.5 percent in October from a year earlier, accelerating from September's rise of 10.4 percent.
The capital goods sector, which mirrors industrial activity, increased 19.2 percent in the year through October, higher than September's 15.1 percent.
"This is an investment-led recovery and should continue to accelerate as we go ahead," said Prasenjit Basu, managing director of Robust Economic Analysis in Singapore.
Government data has shown robust lending by banks. Lending has risen 27 percent in the 11 months to November compared with the same period last year, the strongest growth since 1997.
Industrial output has been strengthening this year after a bumper monsoon in 2003 boosted farm output and spending. That pushed economic growth above 8 percent in the fiscal year to the end of March 2004, the strongest expansion in nearly 15 years.
But high global oil prices and this year's poor monsoon rains have prompted analysts to downgrade their expectations for India's economic growth for the fiscal year to March 31, 2005.
Most analysts clipped their growth forecasts to 5.5-6.5 percent from pre-monsoon views of 7.0-8.0 percent.
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