India posts double-digit industrial growth

India posted double-digit industrial growth for a sixth straight month in February, data showed Monday, adding to pressure on the central bank to further hike interest rates to tame inflation. Output by factories, mines and utilities grew 15.1 percent year-on-year in February, according to the government figures, lifted by fiscal stimulus, cheap borrowing costs, resurgent consumer consumption and growing export demand.
The rise in the Index of Industrial Production was below the 16.7 percent logged in January and slightly weaker than analysts' expectations but economists said it was a healthy performance. The numbers will "likely reassure policymakers that they can remove stimulus without disrupting the economy's growth," said economist Nikhilesh Bhattacharyya at Moody's Economy.com.
India's central bank is widely expected to boost interest rates for a second time since March when policymakers meet next week with inflation, driven by spiralling food prices, spilling over into the wider economy. Many factories, such as those of India's largest carmaker Maruti Suzuki, are running at full capacity as increasingly affluent consumers open their wallets.
"The bad news for the Reserve Bank of India is that it will take some considerable time before extra capacity comes on stream," said HSBC economist Robert Prior-Wandesforde. Even with some economic indicators pointing to a slowing from peak levels of earlier months, analysts say India's recovery appears firm enough to unwind stimulus put in place to shield the economy from the downturn. India's economy should expand by up to 8.75 percent this financial year to March 2011 and return to pre-financial crisis growth levels of nine percent next year, according to the government.
Indian consumer goods output, particularly hit by the global crisis, was a key driver of industrial growth in February, expanding 29.9 percent. Production of capital goods, such as machinery, rose 44.4 percent. The Reserve Bank lifted its benchmark short-term lending rates by 25 basis points last month and analysts say a similar rise could be in store at its policy meeting April 20.