Chidambaram asks Indian banks to boost loans

New Delhi: India's industrial output rose an annual 7.6 per cent in December, outpacing the previous month due to a pick-up in manufacturing, but analysts expect tight rate policy and a firm rupee to keep it below blistering levels seen earlier last year.

Official data released on Tuesday showed output in December grew an annual 7.6 per cent, in line with a Reuters poll of analysts, but higher than the previous month's downwardly revised growth of 5.1 per cent.

The rebound in expansion still leaves it far below the double digits clocked up in much of the first half of 2007.

Analysts said the numbers were unlikely to prompt the central bank to ease its tight monetary policy any time soon with high commodity prices threatening to take inflation higher.

Other data

"Going forward, we expect growth to remain around these levels until end-March and expect it to pick up from second quarter (of fiscal 2008-09), propelled by infrastructure," Shubhada Rao, chief economist at Yes Bank in Mumbai, said.

"We expect policy rates to remain unchanged for now and see a possibility of easing only around mid-2008."

Markets remained largely cool to the data with the partially convertible rupee unchanged at 39.65/66 per dollar from before the release, and the 10 year benchmark federal bond one basis points higher at 7.46 per cent.

Manufacturing, which accounts for 15 per cent of gross domestic product, rose 8.4 per cent in December from a year earlier, compared with downwardly revised growth of 5.0 per cent in November.

Consumer goods output rose an annual 8.7 per cent, and capital goods output continued to be strong with the sector growing 16.6 per cent in December from a year earlier.

Expansion has been dampened by a series of interest rate rises from June 2006 and increases in bank reserve requirements, which have slowed demand for automobiles, real estate and some consumer durables.

At a policy review last month, the central bank kept policy rates steady.